Preamble

The House met at Eleven o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

CHESHIRE AND LANCASHIRE COUNTY COUNCILS (RUNCORN-WIDNES BRIDGE &c.) BILL [Lords],

(King's Consent signified.) Bill read the Third time, and passed, with Amendments.

DUDLEY CORPORATION BILL [Lords]

Read the Third time, and passed, with Amendments.

TENDRING HUNDRED WATER AND GAS BILL [Lords],

A verbal Amendment made; (King's Consent signified); Bill read the Third time, and passed, with Amendments.

INVERNESS BURGH ORDER CONFIRMATION BILL,

Considered; to be read the Third time upon Monday next.

BUSINESS OF THE HOUSE

Mr. Oliver Stanley: May I ask the acting Leader of the House whether he has any statement to make on Business?

The Minister without Portfolio (Mr. Arthur Greenwood): Yes, Sir. I have a statement to make in regard to Monday's Business. The Debate on the Army Estimates, which will take place after the consideration of the Second Report from the Committee of Public Accounts, will deal particularly with the Territorial Army. The Opposition have asked that this alteration be made, and I may say on behalf of the Government that we have no objection.

Orders of the Day — FINANCE BILL

Order for Third Reading read.

11.6 a. m.

The Chancellor of the Exchequer (Mr. Dalton): I beg to move, "That the Bill be now read the Third time "
Proceedings on our Finance Bills are not brief, and we have been, as the custom is, considering this particular Finance Bill for some little while and in successive stages. It is three months and a day since I made my Budget statement, and since that time there has been much discussion, both in the House and outside, upon a number of the items here referred to and as I shall briefly summarise, a number of changes have been made following such discussions in this House. It will perhaps be convenient if I run over very briefly the main changes involved and remind the House of other points in which changes have not been made and which therefore have not been considered so recently.
When I proposed to the House the changes in taxation up and down, contained in my Budget statement, I was aiming at a Budget surplus in this financial year of £270 million, as against a prospective surplus on the existing basis of taxation of £248 million. I told the Committee to which I made the Budget statement that I thought that the £248 million was a little on the low side and that I should seek on balance to fortify the revenue, to use an ancient phrase. I proposed to put up the surplus to £270 million. In fact, a series of concessions have been made in the Committee and Report stages of this Bill, but I have kept an eye—though I have not wearied the Committee with a running commentary of calculations as to how the thing was going—upon the resultant figure. I had it in mind that we ought not to let the prospective surplus fall below £250 million. In fact, it will only come down from £270 million to £258½ million as a result of the tax concessions. I think, therefore, that we have not only given satisfaction in many quarters and done the right thing with regard to a number of concessions, but we have done it relatively cheaply. What more could a Chancellor of the Exchequer desire to do than to do the right


thing at small cost to the State? On this principle at any rate I am sure we can all be agreed.
One word more about the surplus. An argument was deployed, which is familiar to students of our financial Debates, to show that this surplus was, at any rate in part, not wholly genuine. I resisted that argument at that time, and I will not repeat the arguments which I then employed. But I wish to say, for the greater comfort of those who attach importance to that argument—which I myself sought to rebut—that, in the period which has so far gone of 3½ months since the beginning of the financial year, we have made another record, which I hope I may be allowed to mention without seeming unduly optimistic for the future. I am speaking merely about what has happened in the 3½ months that have gone by since the beginning of this financial year; during this time we have achieved a revenue surplus of £234 million of revenue over expenditure. I am sure that the right hon. and gallant Member for Gains-borough (Captain Crookshank), who is very expert in this, will be interested in this point, because he was one of those, I think, whose argument called in question the genuineness of the surplus of £234 million as shown by the accounts now made up. Even if we deduct from that figure the £30 million that we have received from the sale of war stores since the beginning of the financial year, the £20 million received from the trading services, and the £144 million which we have received in miscellaneous revenue, more than half of what I allowed for in my Budget—if we deduct these debatable figures, though I argued them to be completely genuine, we are still left with a realised surplus over the period in question beyond any range of doubt or cavil, of £40 million.
This has never happened before. I have charged those who look after the historical records of the Treasury to look back, and they cannot find in any other first quarter of the year—a period of the financial year when normally the revenue comes in but slowly and the expenditure goes out fairly fast—any precedent for that financial achievement which we are now recording. I shall be interested to hear what ingenious arguments can be produced to prove that this is what the

Opposition would have done had they had the power. I think it is on the whole a very happy state of things, and though I do not prophesy what will happen over the rest of the 'financial year—it would be rash to do so—we have certainly had a very happy start.—[Laughter.]—Why not? It is a very good thing. This buoyancy of the revenue, which has been manifested, is entirely due to the fact that we have full employment in the country and that the unemployment figures are down to less than 2 per cent. of the registered insured population or, putting the matter in another way, that more than 98 per cent. of the insured persons are now at work. That is one reason why the revenue has come in pretty well.
If I may, I will give the House one or two figures showing the effect upon the revenue of the various tax changes that have been made since the Budget statement. Take first the Customs and Excise. We find there that the exemption of kerosene, the changes in the gas and electrical appliances—that is to say, other than space heaters and water heaters remaining at the 66⅔ per cent. charge—and the others reverting to the pre-Budget rates, in some cases completely exempt and in others 33⅓ per cent., the other Purchase Tax concessions, and the net cost of the concession on tobacco to old age pensioners—all these together cost about £10¾ million revenue this year. In a full year it will amount to between £17½ and £18½ million. With regard to motorcars which, as the House knows, stand in a separate category of our classification, the position is that this year on balance we shall gain a quarter of a million pounds as a result of the two operations which have been approved by the House: first, the institution of the £10 flat annual rate and, secondly, the increase of the Purchase Tax on cars above a certain level of price. The net effect of those two together is to give me an additional quarter of a million of money this year. Therefore, so far, taking Customs and Excise and motors together, the revenue is down about £10½ million this year and £17¼ to £18¼ million in a full year.
On the other hand, when we come to the Inland Revenue, the concessions there have been smaller and the total cost of all the concessions made is only £1 million loss of revenue this year and £9 million in


a full year. The £1 million of concession on Inland Revenue is made up principally of Stamp Duty concessions, namely, the exemption of transfer to charities, where exemption from the higher Stamp Duty is costing £300,000 this year; the removal of the duties on solicitors and barristers which was widely welcomed, costing £210,000 this year; and the arrangement about Stamp Duties in respect of nationalised undertakings, which was also widely desired and was thought to be just to the persons concerned, which will cost half a million pounds this year.
A total, therefore, adding together the Customs and Excise and the Inland Revenue, of about £11 million of revenue has been sacrificed this year, which will rise in a full year to between £26 and £27 millions. On the other hand, it will be recalled that in my Budget proposals, speaking in terms of a full year, I made a certain provision by tax increases, which fructifies only later on. Therefore, even looking to the full year—which is not, as the House knows, any one exact and precise year because sometimes it takes more than two financial years for these things fully to stabilise themselves—we have also fortified the revenue to a reasonable extent.
The Finance Bill, as it originally was drafted and considered on Second Reading, contained a number of tax reliefs which have not been called in question, though on nearly all occasions suggestions have been made for their increase. It may be as well for me to recall at this stage that there are Income Tax reliefs embodied in the Bill which I think are generally welcomed. There is an increase in earned income relief from one-eighth to one-sixth, with the ceiling raised from £150 to £250 a year. Then there is an increase in the child allowance for taxpayers from £50 to £60, and an increase in the income limit for dependant relative allowance, designed so that the increase of old-age pensions does not take away the right of taxpayers to receive this allowance in full. The precise formula, of course, is a little more complicated. These three Income Tax concessions will cost about £87 million in a full year and £76 million this year. It will also be recalled that with regard to postwar credits, there was no serious challenge to the proposal, which we have now

arranged, that all persons over 65 in the case of men, and 60 in the case of women, shall have their postwar credits made available to them at an early date, as soon as the administrative arrangements can be made. They will get them in full for all the five years and, hereafter, any person reaching this age will at once become entitled to all the postwar credits he or she may have for the five years.
With regard to the Armed Forces, I would recall as part of the list of tax remissions that, following requests made from all parts of the House, I felt able to propose, and it was accepted, that there should be relief from Income Tax on bounties and training expense allowances for members of the Territorial Army and other reserve Forces. This, I think, was generally approved. In the original Purchase Tax changes, which were accepted with satisfaction, were reductions on certain sports requisites, linoleums and floor coverings, and exemptions for silk stockings. They have already been given effect to, but if was proper to take them into account. We were also able to exempt dust-bins, which was much demanded, and playground equipment, and not only in regard to athletics but also in the more marginal case to make a concession to netball in terms of Purchase Tax and also in regard to works of art and mirrors.

Mr. Bowles: What about tub-pairs?

Mr. Dalton: We have not yet explored how that can be done, but there is a possibility of making provision by Order. It is between the hon. Member for Tyne-mouth (Miss Colman) and myself, and the Order will come later on, if the hon. Lady and I agree. We have finally removed the Excise Duty on artificial silk, and no opposition was raised to that. That, I think, was the removal of a tiresome anachronism; and there was also the exemption on fuel oil conversion, fuel and gas oil, and so on.
One more word about motor taxation. I hope we have got very nearly to the end of our discussions on motor taxation, except in so far as it may be proposed on future occasions to change the actual rates of tax. I hope we have got to the end of the discussion of what the shape of the taxation should be, and that everyone agreed that the annual flat rate equal for


all cars is the best way, and the right way to encourage export trade. Whatever may be said about the rates of Purchase Tax—and I will not repeat the old arguments—I hope that any additional tax on motorcars will take the form of Purchase Tax, and I hope we have heard the last of arguments about the shape of the tax.

Sir Patrick Hannon: I hope we have not heard the last of double taxation on the f £1000 car. Surely the Chancellor will keep that in his mind?

Mr. Dalton: I was expressly reserving the question of the rates of tax. That was what I was trying to make clear, that we should now agree that the annual fee of £10, or some similar amount, was the right way to tax cars, and that if any further revenue was required to be got from the motor industry, or from motor users, the right type of tax was the Purchase Tax, rather than an increase in the fuel tax. I hope we have laid that idea to rest. As I said in discussions earlier, it will be open to discuss the rates of tax, and whether in any particular case of the more highly priced cars there are reasons to show that the double Purchase Tax is not equitable—from a revenue point of view it is a balancing factor—and whether that will cause serious damage. In that case, I have undertaken to look at the matter again.
One word about the means by which we have fortified the revenue to make up for these various reductions. I have to collect a little more money, not much this year, from the Profits Tax. We have had much Debate on the fringes of the Profits Tax, on questions of definition and the like, which I do not want to go into now. But, in this case I think it is useful to have established in this year's Finance Bill, a distinction in respect of the rate of tax between profits to be put to reserve, and profits to be distributed. I think that the broad proposition that the payment on profits distributed should be heavier than on profits ploughed back into the business, is sound, and, whatever may be said about detail, I hope that principle will be accepted as being in line with the industrial needs of the time.
There have been provisions for increases in Stamp Duties on Stock Exchange transactions of various kinds, and much

Debate has taken place on the tax on bonus issues. I have made various concessions there. The Opposition, of course, does not think them very substantial, but I have shown my good will towards them by exempting all bonus increases of less than 5 per cent. We have had a long Debate on that, and I will not repeat the argument, except to put it back, so to speak, into its proper perspective which is that tax on bonus issues is one of a fairly large range of increases in Stamp Duties on Stock Exchange and other transactions in general, and transfers of real property above a certain level. Here again I think it will be generally felt that when the country is in need of revenue, this is a very good way of collecting it. If I may take a very simple balancing case, it is better to collect a little more by way of Stamp Duty on Stock Exchange transactions and then to reduce the Income Tax falling on people of moderate means. Similarly, the Legacy and Succession Duties have been modified. I would like to emphasise again a point which has not been posed as the House has not focused much attention in discussions on these Clauses—I suppose they were accepted as generally reasonable—that although Legacy and Succession Duties are shown formally, we are making a number of exemptions specially designed to benefit small people, and those who receive relatively small amounts on the death of other persons. I have already referred to the exemption from the increase of the stamp duties of transfers, conveyances and leases to charities, and that I think is commonly accepted as just.
It only remains to me to thank all who have helped in getting this Bill through. In particular, as on previous occasions, my arms have been sustained at all times by my right hon. Friend the Financial Secretary on the one hand and my hon. and learned Friend the Solicitor-General on the other. If occasionally I have had to slip away for a moment, I have always been completely confident that either alone or together they would be able to withstand any cross-examination or argument. I want to thank both very much for what they have done. Although occasionally differences of view developed, and very occasionally the Opposition went so far as to divide, for the most part I think they have accepted—I will not say with complete


agreement, but over quite a wide field—the suggestions I have put forward. They voted against the Second Reading of the Bill. I do not know whether they are going to vote against the Third Reading. I think they would agree with me that it is a much better Bill since they voted against the Second Reading. Many improvements have been made, and many Amendments have been put forward from all parts of the House which I have accepted as they stood, or in their substance. Although the time has been long in reaching this Parliamentary journey's end, none the less I think considerable improvements have been made, and I am grateful to those who have contributed to the matter. Before closing, I recall that I have not mentioned one of the changes, and to complete this survey I should mention it now. That is the power taken to impose hereafter, if it should seem necessary to do so, a duty on imported films.
These Finance Bills come separately once a year and it is not easy to get a sense of trend by one alone. I hope, however, that it will be felt that a number of things which I have proposed this year, and to which the House has agreed, in many cases unanimously, are in line with what has been proposed in earlier Finance Bills since the last Election, in particular in relation to the lessening of the burden of Income Tax on the lower levels of income on the one hand, and on earned as distinct from investment income on the other hand. I have sought to carry that principle further this year. That is one of the underlying thoughts which have run through this Budget and its predecessors, and which I hope may continue to run through any further essays I may make in the future.
Finally, I touch upon the overseas deficit. That is our great anxiety. We have discussed that subject on many occasions, and we shall discuss it again. This Budget does not directly touch it and indeed purely fiscal measures cannot do the major part of what would be required in that field, but it does touch it here and there, as I have indicated. I end by repeating what I said in my Budget statement. The contrast is most remarkable between the great difficulty of the overseas position, more difficult than we, two years ago, had any grounds for expecting, and the relative ease of the purely domestic financial posi-

tion, in which things are very much better and easier than we would have had any reason to expect two years ago. The size of the Budget surplus, combined with the high level of expenditure, which we have been able to maintain for developing the social services, and the lower levels of taxation that have already been reached, is quite contrary to what even optimistic people would have thought possible two years ago. This has been a remarkable achievement, to which the taxpayers have made their great contribution, I wish to thank every one who has assisted in that direction. I repeat, and it is right that it should be my concluding word on this Measure, that the external situation is of a very different character, and we shall unquestionably have to give further thought and consideration to it. But that is not for today.

11.32 a.m.

Mr. Oliver Stanley: The Chancellor said that we have today reached the final stage of what has been a long Debate upon this Measure. Unfortunately, the final stage is also the most restricted, and it will be impossible for me today to touch upon many of the things which I should have liked to discuss. If, for instance, I were to argue that, despite all the grand talk in the past, the Chancellor has conspicuously failed to use this Finance Bill as an instrument of national planning, and has rather used it on this, and on other occasions, as an instrument of party vote catching, you, Sir, would rule me out of Order. If, on other hand, I were to try to argue that this Bill merely stereotyped the misguided financial policy which, over the last two years, has already distorted our economy, and contributed in no small measure to the ominous overseas gap to which the Chancellor referred again, I should not be allowed to proceed. Similarly, I feel that your ban would fall on any attempt to prove, as I should otherwise be able to do, that in the financial field as in other fields, the Government have wholly failed to face up to the imminent perils of the increasing inflation and the decrease in production with which this country is faced.
As it is impossible to raise these matters today, other opportunities must be, and no doubt will be, sought. I think I should be permitted to say one word in response to the Chancellor's concluding


remarks. I think it is highly dangerous to draw, as he does, this sharp line of division between the dangerous external position and what appears to be the more flourishing internal position, because it will have the effect of increasing complacency among the vast mass of the people in this country who do not yet realise the dangers that face us, and who may be led, by the Chancellor's statement, to think that it is possible to maintain a prosperous internal financial situation if our external position continues to deteriorate at the rate at which it has been doing during the last few months.
I will content myself entirely with the details of the Bill which is before us, but I do not think it would be out of place or out of Order if I were to make two comments upon the general line of our discussions. First, it is interesting to note that though these discussions have been long, and on several occasions I am sorry to say, have also been late, never has it been necessary to move the Closure during the whole course of the proceedings. That is saying a great deal, when we think about the Government Chief Whip, who has no inhibitions about moving the Closure; he does not feel any difficulty about it. I sometimes think that when he comes to his last days, which we hope will be a long time hence, with his last failing breath, he will be heard to murmur, "I beg to move, That the Question be now put.'" The fact, therefore, that during the whole of these Debates he has not found an opportunity for exercising this peculiar talent of his shows that the discussions which have taken place have been constructive and necessary, that no time has been wasted, and that this House could not, with any safety, agree to any curtailment of the time which this year has been allowed for the discussions.
The second point to which I wish to call attention is that I do not think that in all the time I have been in the House—I will not mention how long, because the period would not sound impressive compared with the period which some hon. Members are able to mention in that respect, but still it has been a fairly long time—I remember a Bill which, in its final printing for Third Reading, has been so different from what it was when it was first printed, and even more from the

forecast which was given in the Budget Resolutions. At every stage, owing to arguments advanced, sometimes from one side, sometimes from the other, and sometimes from both sides of the House, the Chancellor has had to make alterations. It is important to remember that at a time when there is talk, as I believe there is in Government circles, of curtailing the stages available for the discussion of the Finance Bill. Any Members who look back in an objective spirit to the proceedings on this Bill will see that, at any rate so long as this Government are in power, we should think not of curtailing stages, but if necessary of adding to them, because they clearly need not less but more opportunities for correcting those mistakes which come from lack of caution and those omissions which come from lack of foresight.
By far the most important Clause in the Bill is Clause 9, which sets the standard rate of Income Tax. That standard rate of 9s., after two years of peace, is the foundation on which is built the whole monstrous superstructure of taxation which this country has to bear today. I will not deal with that point at any length. My right hon. Friend the Member for the City of London (Mr. Assheton) intends to deal with it when he speaks later in the Debate, but I should like to remind the House that in winding up the Debate on the Budget Resolutions, I asked the Chancellor a question. It joined the great majority of the questions which I have asked the 'Chancellor in the past, in that it disappeared without trace and without reply. I pointed out then that the rate of national taxation now was at something like 7s. in the£ of our national income. I asked him then—and I now ask the Financial Secretary—whether he agrees with many economists who say that there is a ratio of taxation to national income above which it is impossible to go without disastrous inflation. If so, I would like to know whether he agrees with those many economists who would put this figure at something between 25 and 30 per cent. and, if that is so, I would go on to ask, having already surpassed those limits, what he intends to do in future to reduce them?
I should like to deal briefly with one or two of the Clauses of this Bill. For my purpose, I will divide them into two parts. There is a group which deals


largely with indirect taxation, and many of those Clauses have a very considerable effect upon the individual taxpayer. There is another group dealing with direct taxation and those Clauses are more technical in their character, more limited in their scope, but yet undoubtedly require just as much investigation and discussion by this House. With regard to the group in the indirect taxation class, there is, first, the Tobacco Duty. I want to say little about that today except that I think it will go down in history as the most expensive economy that has ever been made. I do not know whether the House and the country really realise the mechanics of this saving. In order to save £7 million worth of tobacco, we are imposing upon the people of this country £70 million in tax. If that is going to be a precedent for the way in which we are going to make the far more substantial economies in dollars which are going to be necessary in the future, the taxpayers must regard it with horror. We do not disagree with the necessity for saving this sum in dollars. We did ask, and we still ask, whether there is not a better and less expensive way of doing it than charging £10 in taxation for every £1 that we save in dollars.
Next there was the motorcar tax to which the Chancellor of the Exchequer himself referred—the change in the basis of the annual tax on cars. I, in common with all hon. Members on this side of the House, welcome the agreement which has been reached among motor manufacturers as a whole. We are grateful to the Chancellor for acceding to their requests. We hope, as he does, that this will do something to help the export of British motorcars in the future, but I must be excused if I refer once again to the doubts I have whether this change will be found in future to be so effective, so dramatic in its effect as was made to appear in the course of the Debate. I have my fears that what limits the export of cars from this country, by limiting the home market upon which the producer can depend, is not so much the method but the weight of motor taxation. I am afraid than even though the alteration of the method may give some relief, we shall never be able to compete in the free markets of the world with the car exports of America, so long as we stagger along under a total weight of motor taxation far beyond anything that either the pro-

ducer or the user of a car in America ever has to bear.
We hope that the prospects resulting from this change will be fulfilled, but we fear that sooner or later a Chancellor of the Exchequer will have to face up to the fact that we cannot hope for a big increase in motorcar exports unless we are prepared to have a big decrease in motorcar taxation. He will have to decide, in the light of the national interest at the moment, whether he is prepared to sacrifice revenue for the export of cars. I do not think that any longer he will be able to go on hoping, as we still hope, that we will get the best of both worlds.
I must say a word or two about one matter contained in our Purchase Tax discussions. I refer to the question of electric cookers. I think that the history of electric cookers over the last 18 months ought to be published in a little pamphlet and issued to everybody in the country as an object lesson in national planning. Certainly, any out-of-date electric cooker, any electric cooker which can no longer cook and for which there is no longer any electricity, should be hung up on the walls of the studies in which right hon. Gentlemen opposite prepare those weekend speeches in which they boast about the value of national planning. Then, as they write these purple perorations comparing the beautiful order of a nationally-planned economy with the chaos of the old free society, they will just cast a glance on the cooker hung on the wall and they will hurriedly dive into their papers for a different cliché.
This history of electric cookers has, indeed, been a revelation. In April of last year, with a powerful speech and the most optimistic of gestures, the Chancellor of the Exchequer took the tax off electric cookers because he wanted in the modern world to encourage people to use modern methods. The housemaid was out of date; the electric cooker was progressive. Therefore, let the people be able to buy the electric cooker as cheaply as possible. A year later he comes back and says that he has learned his lesson. He has found out in the course of 12 months that an electric cooker is no good without electricity. Therefore, in April, he says that we cannot have electricity and anybody who wants to buy an electric cooker without electricity is only buying it as some


kind of ornament or luxury, and therefore, the tax is put back again. There is a second thing. But in a few weeks hon. Members on both sides point out to him that, in fact, in the vast majority of houses now being erected, if one does not cook with electric cookers, one cannot cook at all, that people still have—we do not know for how long—something to cook, and they are still determined to cook it, and the only effect of this tax was not to make people buy fewer cookers but to make them pay a bigger rent for their council house. So off the tax came again. All that in 14 months. It is on the classic method of the present Government's planning—order, counter-order, and, finally, disorder.
Of the other big matter in the line of indirect taxation, that of the films, I will say nothing at this moment. It is today not a substance, but only a shadow. We do not know whether in the coming months the Chancellor of the Exchequer is going to take the action which the House, under this Bill, enables him to take. All that we can call attention to is the fact that the cut in newsprint becomes immediately effective, while the cut in American films is left possibly for some future date.
Now I turn for a few minutes to two matters in the other group, that of direct taxation. I agree that these matters are not of so much interest to such a wide circle of the population. They do not touch directly the pockets of so many people, but they have an importance today, and they may in future have an even greater importance. The first of the questions is that of the Profits Tax. I must say that when this tax was first introduced, I thought that nothing would be simpler than to convince the Chancellor of the Exchequer how wrong that tax was. All we had to do was to refer the Chancellor of the Exchequer to an authority which he would himself readily admit was that of the greatest living economist. If other hon. Members are not sure who I mean, the Chancellor himself is well aware. I mean, of course, the Chancellor of the Exchequer in a previous incarnation; and I was hoping that this appeal from Philip drunk to Philip sober, this appeal to the right hon. Gentleman in his irresponsible days as Chancellor of the Exchequer from his responsible days as a

member of His Majesty's Opposition, would be enough to secure the dropping of this tax. No one could have pointed out more clearly than he did, with more devastating effect, the unfairness that this had as between the holders of equity shares and other investors, no one could have demonstrated more clearly the disastrous effect that a discrimination, an unfair discrimination, of this kind, against the people who take the risks, might have on enterprise and risk-taking in the future. I have yet heard no argument of comparative weight to put against that weighty pronouncement made by the Chancellor only 10 years ago.
It is quite true that the hon. Member for North Battersea (Mr. Jay) tried to come to his assistance. His argument was a simple one. He said that already this Government had put so many discouragements on private enterprise that it really was not worth bothering about this new one. It was rather impressive. He described how, in a Government office in the last year or so—until he joined this House—he had managed to prevent any industry from starting any development it wished to undertake. Pointing to that with pride, he said, "Really, why are you worrying about this little further discouragement?" But that may not go on for ever. The right hon. Gentleman may some day face up to realities. The Government may sometimes try not to go on discouraging, but, instead, to encourage enterprise and risk-taking in those free industries which, at their own suggestion, are still going to comprise 80 per cent, of our industrial capacity. And when that happens—and it may happen—the Chancellor will regret having put this additional discriminating handicap in the way of those who want to be enterprising, who want to take risks, and who want to develop the production of the counrty.
The other point to which I want to refer is that of the tax on bonus shares. This, as the Chancellor says, is a technical point. It is a small point. It will not affect, of course, a great many people; and perhaps not a great many people will be interested in it; but, certainly to me, during the course of the Debates, it was the most interesting of all the points we discussed, because it most clearly revealed to me and to my hon. Friends on this side of the House the mentality of the Chancellor. First, it was


made abundantly clear during our Debates upon this matter that the Chancellor did not know anything about what bonus shares were. It is only fair to say that neither did either of those two henchmen to whom he has referred in such glowing terms this morning. Incidentally, I should like, on behalf of all my right hon. and hon. Friends, to join in the compliments which the Chancellor has paid to the Financial Secretary to the Treasury and to the Solicitor-General. Throughout the whole of our Debates we have found those two, the right hon. Gentleman and the hon. and learned Gentleman, often mistaken, usually bewildered, but invariably courteous and patient. So far as we are concerned, we would not change them for anything. But having said that, it is only fair also to say for the Chancellor that the other two gentlemen, the Financial Secretary and the Solicitor-General, besides making clear that they knew nothing about bonus shares, also made it equally clear that they cared nothing about them. But the Chancellor was different, because the depth of his ignorance of bonus shares was only equalled by the height of his emotions about them. All through the Debates he appeared like those art Philistines whom we know so well, for he said, "Of course, know nothing about bonus shares but I do know what I do not like."
We had a number of Debates, lengthy Debates, upon them. Fortunately for the Chancellor, they always occurred in the early hours of the morning, so that little publicity was given to them; but during the course of these Debates certain things emerged quite clearly. First, it emerged that the Chancellor is opposed at the present time to heavy distribution by way of dividends of profits made during the course of the year, and he thinks—and there, most of us are in agreement with him—that the more prudent course at the moment is that a substantial portion should be put to reserves. Secondly, it emerged quite clearly that the capitalisation of past profits—of what, in fact, was an issue of bonus shares—is the most effective way of preventing those past profits from being distributed to the shareholders by way of annual dividends. It emerged that it was a more effective safeguard, than, for instance, having emissaries of the Chancellor upon boards—we have only to look at Anglo-Iranian—and even more effective than having

boards which are political supporters of the Chancellor. We have only to look at the "Daily Mirror" for that. Thirdly, it emerged that the Chancellor—although this was an effective protection against what he himself wanted to be prevented—was prepared to throw it away entirely for the sake of political propaganda; because only one argument emerged from all the Chancellor's statements on this point, and that was that the inability to issue bonus shares may perpetuate what is a wholly unreal view of the company's position, but that unreal view enables party politicians to erect upon it a basis of wholly fallacious propaganda. As they desired to retain that fallacious propaganda, they had also to retain the unreal view of the company's affairs on which this alone had to be based.
Quite apart from the weight of the Chancellor's argument in favour of this tax, there is another most disturbing feature about it. If the Chancellor of the Exchequer really believed what he said about bonus shares, and if he thought that they were as immoral as he held them to be, and that they were effective in deceiving the trade unions, the workers and the investors, he has, under the elaborate machinery for the control of borrowing, power to prevent an issue of bonus shares from being made. One would think that if he really believed that they were so immoral, that would have been the course to take. He does not say that. He says that a company may issue bonus shares so long as he gets his rake-off. Condoning immorality, in return for a share in the proceeds, is not unknown in other circles. I think that the Greeks had a word for it. But this is the first time that a Chancellor of the Exchequer has joined that hitherto more restricted circle. In the past, the Chancellor has often compared himself with Mr. Gladstone, not always to Mr. Gladstone's disadvantage. I rather hope that I may be privileged in some future life to listen to a conversation between the right hon. Gentleman and Mr. Gladstone. I am afraid that it will probably have to be a long-distance conversation; but I shall certainly be interested to hear the comments which the Grand Old Man will make upon this new departure in financial morality.
As the Chancellor of the Exchequer said, we voted against the Second Reading of this Bill. It was possible during


the Second Reading to develop and deploy the wide arguments, but because of the unsatisfactory way in which those wide arguments were answered, we voted against the Bill to show our disapproval. We do not intend to vote against the Third Reading. We have done what we could in the interval to make this a better Bill. We have not been able to do much, but we have certainly done something. Of course we should have been able to do much more in a situation where argument and not voting counted. We have patched a little rent here, and altered the fitting a little there, but to get a really good suit of clothes we have to have a different tailor, and for the moment we are unfortunately prevented from changing our tailor. Therefore, we shall not vote against this Bill. We shall let it go forward, knowing perfectly well that it is a poor thing, but, as such, not unworthy of the Government and the Chancellor of the Exchequer who are responsible for it.

12.4 p.m.

Sir Stanley Holmes: The Chancellor of the Exchequer has quoted with confidence the figures for the first quarter of the present year, but something has been happening during the last few months which may affect very much the revenue before the end of the year. I am referring to the very steep rise in prices which has been occurring lately. Admittedly, prices have been rising for a long time, but lately they have risen more steeply than ever before. Any manufacturer knows that almost every week he is compelled to pay a higher price for his raw materials, and every housewife knows that almost every day she is having to pay more for the goods she requires. This rise in prices must have an effect on the revenue to be derived from this Bill. Can the Financial Secretary tell us what is the reason for this rise in prices? Is it because of the demand for increased wages and salaries, or is it because the people are doing less work per hour? Whatever the answer, it will have an effect on the revenue to be derived from this Bill and upon savings to which the Chancellor attaches so much importance. Perhaps the Financial Secretary will give us some information, as he did last year, about the savings movement, and will tell us what effect this increase in prices has had since

the Chancellor presented his Budget three months ago.
My second point concerns Surtax. Under this Bill, the State receives from its citizens in the current year £3,451 million, of which £1,073 million is by way of Income Tax and £80 million by way of Surtax. Surtax is supposed to be the tax to "soak the rich," and yet it represents only two per cent. of the revenue. The Lord President of the Council, in a recent speech, informed his audience that nothing further could be expected from the rich, and that any further revenue must be obtained from the ordinary citizen. I wish to show that this £80 million is not worth while. I do not know, and probably the Chancellor of the Exchequer does not know, what class of citizen pays Surtax. When this tax was originally introduced, it was called a "Super tax," and there can be no doubt that those who paid it were the large landowners. Owing to Death Duties and the splitting up of estates, landowners have probably ceased to contribute to any large extent to this £80 million.
I think it will be found that the Surtax which the Chancellor is raising under this Bill mainly comes from industrialists. The Surtax which goes up to 10s. 6d. in the pound after the man has paid 9s. in the pound Income Tax, was originally imposed, not by the present Chancellor, but by Sir John Simon, as he then was, on behalf of the National Government. The idea then was that no one should make money out of the war, a very proper thing indeed. But the war has now been over for three years, and there is the same over-all rate. It is not exactly the same, as Sir John Simon imposed an Income Tax rate of 10s. in the pound, and a Surtax rate of 9s. 6d. in the pound, whereas the Chancellor's rate is 9s. in the pound Income Tax, and 10s. 6d. in the pound Surtax. When the right hon. Gentleman reduced Income Tax by is., he put Surtax tin by a like amount on the higher incomes.
The Government are straining every nerve to improve the country's economic position, which is very serious, if not desperate. They are on the right lines in seeking to increase our export trade, even though they may be overdoing the extent to which they are depriving the citizens of this country of the goods which they require for ordinary comfort. In suggesting that Surtax should be abolished, I


want to remind the House that the prosperity of Britain was built during the Victorian age, mainly through people and firms taking risks with their own money in business ventures in this country, and more particularly overseas. I want to suggest to the Chancellor that this is the only way in which our economic position can be restored. It certainly cannot be done by any policy of nationalisation. If business men take risks and fail, they lose their capital; if civil servants and Government executives take risks and fail, they lose their jobs, so it is never likely that we shall see any taking of risk, or any enterprise, on the part of Government Departments. We all know that all men are not equal in ability, or in the contribution which they can make to the national effort. In diplomacy, statesmanship, art, literature, and many other walks of life there are men who stand out from their fellows. It is the same in industry. There are men whose imagination, gift of organisation, understanding of how to handle men and women working for them, good judgment, willingness to take risks, and drive, put them above everybody else. They are men who are national assets, and they and their like have built up British industry during the past 100 years. They are the men who, today, are finding most of the £80 million Surtax which the Chancellor seeks to raise.
If one of these men does extra work, he has to pay 19s. 6d. in the pound on what he earns. Out of every £1,000 which he earns, the Chancellor takes £975, and leaves him with only £25. There is no incentive. Everybody needs incentive. Only recently it was reported that some workmen had refused to work overtime, because they were offered only time and a quarter instead of time and a half. They thought that they were not being given enough incentive for what they were being asked to do. The industrialist who, in the old days, as I have said, took risks in new ventures knew that he might lose his capital, but he also knew that if he was successful he would retain a considerable portion of the profit which he made. To-day, if he fails, he loses his capital, and if he succeeds the Chancellor takes, in Income Tax and Surtax, 39/40ths of his profit. So it is not worth while; there is no incentive. On the contrary, postwar taxation policy is a positive deterrent.
If the Chancellor would be willing to give up the £80 million Surtax which he

requires, that sum would go into the pockets of a limited number of people. Let us consider in what way they could, or would, use that money. They could not spend it, because there is hardly anything to buy. They would undoubtedly plough it back into industry. The result might be that it would add to their personal fortunes. When they died the Chancellor, through the ever-increasing Death Duties, would take an additional amount. In other words, on that point alone the Chancellor, by abolishing Surtax, would merely be deferring the receipt of a certain amount of revenue. But if he would abolish Surtax forthwith it would not mean that he would have to wait until the death of any of the present Surtax payers for a quid pro quo. By abolishing Surtax it would encourage industrialists to start new ventures, particularly overseas, which would bring much valuable hard currency to this country. If they were successful, the Chancellor would receive not only Income Tax from their profits, but Profits Tax, and also Income Tax from those whom the industrialists employed.
I would go so far as to say that if the Chancellor abolished Surtax, and gave up the £80 million which he is budgeting for, he would more than make it up in file first year from additional Profits Tax and Income Tax, and still would have in prospect the additional Death Duties to which I have referred. If that were done, and industry were encouraged, it would not only improve the country's economic position, but would remove from the minds of many workers the fear which is beginning to creep into their minds once more—the fear of unemployment. The Chancellor might say that he cannot abolish Surtax in the Bill which we are now considering, as we have reached the Third Reading. That is quite true, but the Surtax in this Bill is not Surtax on this year's incomes. The Surtax to which the taxpayer will be liable under this Bill, payable on 1st January next, is Surtax on income for 1946–47, the year ending 5th April last. Therefore, the Chancellor of the Exchequer, while he is unable to make any alteration in this Bill, could quite well make an announcement that when he introduces his Budget next year he will abolish Surtax; then, forthwith, the benefits which I have ventured to suggest would accrue. I do not expect an answer from the Chancellor today. He may not


have thought of this idea, but I am sure that it is a very practical one which would greatly assist the economic position of the country if it were adopted.

12.21 p.m.

Mr. Benson: We have had two extremely interesting speeches from the Opposition by the right hon. Member for West Bristol (Mr. Stanley) and the hon. Member for Harwich (Sir S. Holmes), complaining that, although they have done their best, the Opposition had not been able to make any really serious changes in the Finance Bill. They have outlined more clearly today the changes which they had in mind. For example, the right hon. Member for West Bristol objects to Income Tax, object to Profits Tax, objects to Tobacco Tax, and objects to motor tax; and now the hon. Member for Harwich objects to Surtax. Had the Chancellor anticipated the advice of those two hon. Gentlemen and carried it out, the Finance Bill would have been a very popular one. There would have been no taxation left on any one—not even the rich. The right hon. Member for West Bristol also warned the Chancellor most seriously against the dangers of inflation. How one is to meet the dangers of inflation and, at the same time, make slashing reductions both in direct and indirect taxation, I, frankly, do not know.
What the Opposition never have done is to table their proposals for really dealing with inflation—and that is how to reduce expenditure. They have, from time to time, girded and complained about the number of civil servants, but they know perfectly well that any practically possible cut that could be made would be so small that it would have little or no bearing on Government expenditure. It is not the salaries of the civil servants that account for the t £3,500,000,000 which we are expending. Moreover, we cannot cut the Civil Service without doing one of two things—either materially reducing the efficiency of the Service, or completely changing Government policy and cutting out great services to the community. We know perfectly well that even with the large numbers now employd in the Civil Service, there is scarcely a Government Department that is not disgracefully overworked. How long does it take to get a reply from any of them? The Board of Trade is dealing with a quarter of a

million letters a day. It probably dealt with 5,000 a day before the war. It is no use pretending that we can materially reduce expenditure without very drastic changes in social policy. I would take the statements of the Opposition on the subject of economy more seriously if they were prepared to tell us what great social services they would be prepared to slash. The hon. Member for Harwich raised a very important and difficult problem—the question of incentive. Every one knows that very high taxation—taxation even below the level we have at the present time—must ncessarily produce some impact on incentive, when the major element of incentive in business is cash returns. That is a problem which I have mentioned more than once in this House, and it is a problem of extreme difficulty to solve because it is not a problem that can be solved in vacuo.
The heart of our financial structure is Income Tax. In the old days when Income Tax was 1s. in the £, it was primarily a revenue tax, but Income Tax today has become a great deal more than a revenue tax. When graduation was introduced and when the graduation was over a period of years steadily steepened, one purpose of that graduation was unquestionably a desire to redistribute the very unequal incomes of the community. It was a social measure as well as a fiscal measure, and today it is quite unthinkable that we should, as the hon. Member for Harwich suggested—abolish Surtax, even if it were true that it would have all the effects that he claims, it would have very adverse results which would far outweigh such good as he suggested. One of the major difficulties of this problem of incentive is that we are moving into an entirely new social outlook, and moving nearer to equalitarianism than ever before.
As a matter of fact with graduated Income Tax as it has been in the past, I think that we must admit now that from an equalitarian standpoint and a desire to meet the growing equalitarian feeling of the country, even a stiff graduation of Income Tax at the present time has failed. It does not go far enough. But I am not at all certain that no matter how stiff we make it we can ever through taxation alone produce that equalitarianism which the community is now demanding. I am perfectly well aware that incentive and risk by owners of capital is essential to


progress, but let us not pretend that our industrial system rests solely upon the initiative and energy of the owner and his capital. There is the initiative and the energy of the workers to be taken into consideration. How often has it been said from the other side of the House that we have to get a lot more work out of the miners and out of the workers generally. In practically every Debate that we have had in the last two years on the economic situation at one point or another this question of increased output from the industrial worker has cropped up.
Anyone who has come in contact with working class opinion must realise the resentment at the fact that, despite the rate of taxation, there are a large number of people in this country whose standard of living is on a range quite beyond comparison with that of the working classes. That is biting very deeply and creating a great deal of dissatisfaction. It is no use pretending it is not. It is not merely unearned income, which in the ultimate is an indefensible form of income, which is ca using the resentment. It is the vast disparity between the higher ranges of industrial remuneration compared with the lower ranges, and so long as it is regarded as—

Orders of the Day — ROYAL ASSENT.

Message to attend the Lords Commissioners.

The House went; and, having re-turned—

MR. SPEAKER reported the Royal Assent to:

1. Isle of Man Harbours Act, 1947.
2. Penicillin Act, 1947.
3. Indian Independence Act, 1947.
4. National Service Act, 1947.
5. Agriculture (Emergency Payments) Act, 1947.
6. Foreign Marriage Act, 1947.
7. Trafalgar Estates Act, 1947.
8. Havant and Waterloo Urban District Council Act, 1947.
9. Southern Railway Act, 1947.
10. South Metropolitan Gas Act, 1947.
11. South-West Middlesex Crematorium Act, 1947.
12. Felixstowe Urban District Council Act, 1947.
13. Nottinghamshire and Derbyshire Traction Act, 1947.

14. Wear Navigation and Sunderland Dock Act, 1947.
15. Swindon Corporation Act, 1947.
16. Luton Corporation Act, 1947.
17. Felixstowe Pier Act, 1947.
18. London County Council (Money) Act, 1947.

Orders of the Day — FINANCE BILL.

Question again proposed, "That the Bill be now read the Third time."

12.44 p.m.

Mr. Benson: Before the arrival of Black Rod I was on my last point. It was the failure of the graduated Income Tax to achieve one of the functions for which it is designed, namely the introduction of a greater degree of equality. As a matter of fact, the very high rate of taxation has to some extent defeated itself in that now we find that the incomes of those who can command high salaries have increased enormously to meet, or rather to circumvent, the higher rate of our Income Tax. There is undoubtedly a very strict limit to which any form of taxation can go to bring about this greater equality which I think the nation is demanding. A Third Reading Debate on the Finance Bill is not appropriate to the discussion of such alternative methods to a graduated tax, but I feel that this problem of incentive—which is being bedevilled by our higher rate of taxation—and the equally difficult problem of meeting the equalitarianism which the age will demand cannot be solved by taxation. I think that ultimately they will have to be solved in the only possible way—that is by a general recognition of the fact that the mere possession of some talent which gives a man almost a monopoly of certain skills, should not and must not enable a man to demand an income or a standard of living completely out of consonance with those of the majority of the people.

12.47 P.m.

Mr. Walter Fletcher: I do not propose to follow the hon. Gentleman the Member for Chesterfield (Mr. Benson) very far in his incursion into the field of equalitarianism, except to say that there is another check on the effect as it appears in this Bill of too high a rate of taxation in its killing of incentive. I believe that it does tend to kill incentive,


but the cure may be found in a form which would be extremely bad for the interests of this country—that is, in the export of brains and ability. That is the thing which we have to fear most of all—if in this country the Government evaluate at too low a figure what is contributed by the man of enterprise, brain knowledge and energy. If he is too oppressed by the incidence of taxation, then there is every sign that he will take what he has to contribute—which is his knowledge and his enterprise—to another market. In the long run, that may not be a bad thing if the result is the building up of industries in other parts of the world which nevertheless are still attached to this country, but from the point of view of revenue and increasing the production of the best type of goods, to drive out of this country that type of brain and energy by too high a rate of taxation is a disastrous thing. I appeal to the Chancellor, when he is reconsidering these matters, to see whether he is not approaching, or has not even overstepped, the limit which will have the effect I have tried to outline.
The Chancellor began, as we are accustomed to expect from him now, with a spate of self-laudation, pointing out what a magnificent Budget this was and how, even after the very long Debates we have had, it was still his Budget, and that it was to be counted as a credit to him. It is just possible that in the Debate which has taken place since, the persistent efforts that have been made from all sides of the House, and chiefly from this side, although they have not caused him to see the light, may have removed the scales from his eyes, because there have been enormous improvements. The right hon. Gentleman spoke about the buoyancy of the revenue rather, I think, in the terms of the farmer who goes into the stall of cattle to look at his stock which is being fattened with thoughts of killing it later on. It is worth pointing out that what he refers to with pleasure today as the buoyancy of the revenue, he calls on other occasions something quite different. When it is producing the inflationary tendency which he fears, it is called "too much money chasing too few goods." Those are two expressions for exactly the same thing. The buoyancy of the revenue produces exactly the same too much money

which he objects to when it chases the too few goods.
I would like to join in the congratulations which the Chancellor and others have offered to his two assistants. As a newish Member, I find it very difficult to follow and understand all the Clauses in a very complicated thing like this Bill, but when the Solicitor-General, in particular, has explained a Clause to us two or three times, I cannot help feeling that his spiritual and mental home is the maze at Hampton Court. I cannot find my way out of the Clauses, any more than can any other hon. Members.
I want particularly to refer to the taxation of motorcars. In the sort of semi-valedictory blessing which the Chancellor gave today, there lay a certain danger. During the Debates on this subject, he said that taxation is a limiting factor on design. I believe that the very welcome concessions he has given us have all been made with that end in view. Though I agree with my right hon. Friend the Member for West Bristol (Mr. Stanley) that it is probably the weight of the taxation rather than anything else which is the limiting factor, it is only right, in order to avoid great disappointments in the future, to point out that there are other limiting factors, not directly financial, which must have a very great effect. What really limits and guides design at the present moment in this connection are causes going back a very long way. There was the robbing of the Road Fund. I will not at the present moment say who was the original robber, but only that the subsequent robbers have joined in the robbery with the greatest enthusiasm, thinking that they could get the benefits and lay all the blame on the original robber. Nevertheless, the robbing of the Road Fund has led to fewer roads being constructed and that has been limiting factor on the design of motorcars.
The fact that in this country, even under the present Government, buildings are being put up of which hardly any have garages which can take the cars that are supposed to be the ideal ones for export is a limiting factor. We have just seen installed a new system for parking in towns—yellow signs on lamp posts, whether for the guidance of man or dog I am not quite certain—but that is certainly supposed to have the effect of driving motorcars away


from our main streets. All that is a very direct limiting factor on design. If one has not the opportunity to produce certain types of cars for the home market, one cannot really get down to the matter of exports. Quite inadvertently the Chancellor may be helping the motor trade in their export drive with what he has done in the Finance Bill. We tend to talk very much too loosely of the export market for mortorcars as if it were a homogeneous thing and as if all cars were of one type, and that type the right type for export. That is no longer true. We have to see how our overseas motorcar market has developed and how it will be effected, not only by this Bill, but later on.
I have spent a good deal of time travelling over most parts of the world and I have seen the new development there. In a great many towns, and round a great many new towns, more roads have been built. In those urban and semi-urban districts a motor car of the 12 to 18 horse-power type made in this country is the ideal one as it is mostly for general use and round-the-town use, but in the bigger open spaces the motorcar which is ideal is a much larger vehicle, for which those of American and Canadian manufactures are much more suitable. I believe we shall get the best out of these concessions which the Chancellor has given if we realise that our target must be the medium-sized car for that limited market, which is still a very big one, and not for the market where we have bad rough roads and need a very heavy, well-sprung, large and roomy car.
I would like to give one final note of warning on the subject of motorcar taxation. It is that this is not a magic wand waved by the Chancellor that must immediately result in the motorcar industry producing at short order, the ideal car and building up an enormous export trade. It has taken years, if not decades, to get into the present position, and it will be most unfair if Members of the Government and hon. Members opposite come along in a very short while and say, "There you are—we have given you all you ask, and you are not producing the goods; it is another instance of the failure of private enterprise; here is another industry which we ought to take over, regulate, push about and in the end throw into our nationalisation bag." These concessions are a good beginning.

It is certain that the industry will seize the opportunity and use it to the best advantage. But let us see it in its true perspective.
I have another point to make on the subject of distributed profits and the incidence of taxation thereon arising from this Bill. I do not believe the Chancellor has taken into account nearly sufficiently, those very large groups of firms and businesses which were badly hit by the war by being overrun by the enemy in the Far East and in many other parts of the world. It will take them many years to get into their stride again; they are still suffering from the effects of being overrun, and from the slowness of the Government in settling claims for war damage and other risks; and at the end of five or six years of no dividend for the equity shareholders, who took the risks in building up these vitally important industries which are one of the biggest dollar producers within the British Empire, heavy extra taxation falls on them and no sort of weight is given to the arguments put forward for some sort of relief.
Looking at this Bill in its true perspective, I cannot do better than emphasise the warning given by my right hon. Friend the Member for West Bristol that we must not be too complacent about this wholly unhealthy buoyancy, due to there being insufficient goods and services for the national revenue to be expended upon and we must not listen to the siren voice of the Chancellor—although he puts in at about every third phrase, "I wish to give you a serious warning that all is not well"—which tends to make his speech read rather more rosily and complacently than the note of warning would indicate. If we do not listen too carefully and do not see that the true picture is one in which our real situation is worse this year than it was last year and not better, as he was trying to make out in his speech, we shall not be doing the House, the rest of the country, or the rest of the world, a service.

12.59 p.m.

Mr. Walker: It is with a good deal of trepidation that I poke my nose into this Debate on the Third Reading of the Finance Bill. There are just two points I would like to mention. First, I would like to say how much I enjoyed the very entertaining speech delivered by


the right hon. Gentleman the Member for West Bristol (Mr. Stanley). I think he must understand how much I deplore the fact that he left the glorious hills of Westmorland to become the representative of the bombed city of Bristol. As one of his old constituents—I well remember the time when he first became the Member of Parliament for the County of Westmorland—I want to pay that tribute for the very entertaining speech he gave us this morning. I noticed that the right hon. Gentleman remarked that this Bill on its Third Reading had little resemblance to the one which appeared in the first instance because there were so many alterations, and he had a severe criticism to make of Clause 9. I was hoping that, while criticising Clause 9, he might go one step further and say a few words about Clause 10, because it is that Clause in which I am most interested. That has not been altered.
I am referring to the relief for earned income which has been increased from 1/8th to 1/6th and that is a valuable concession. We have heard a great deal about incentives and I think that that relief is a great incentive to every type of worker in this country. Although it is small, perhaps too small for the right hon. Gentleman and his hon. Friends to recognise as being of any importance, yet if he will come within the circle of the working-class communities, if he will go into the trade union branches and among men who have to depend upon their weekly wage, he would hear a certain amount of praise for this improvement in the Finance Bill. Another point in Clause 10 is that the allowance has been applied to the aged people. There, of course, it is limited to £500to a year, but it brings within its purview a wide circle of deserving people who have done great service to the country, who have lived their lives humbly with no excess of salary, and it is worth noting that they will enjoy this allowance of 1/6th of their total income.
I do not want to make any comment about any other part of the Finance Bill, although I was interested when the hon. Member for Bury (Mr. W. Fletcher) started to speak about the robbery of the Road Fund. I do not know whether he remembers who was the robber, but many of us on this side of the House are very

conscious indeed of the identity of the person who performed that little act of robbery which has had such dire consequences to our roads. I want to thank the Chancellor for this Bill. I agree there is nothing really remarkable about it, but we are living in days when changes of a remarkable nature could not possibly take place, and I am only too pleased to think that we have a Budget of this description two years after the end of six years of bitter and fearful warfare. I hope that, in the ensuing year, when we hear his next Budget statement, there will be some attractive features connected with it which will fill us with delight and give us a great deal of satisfaction.

1.4 p.m.

Sir Arnold Gridley: It is not unpleasant to me, Sir, and I hope it is not unpleasant to you and to other hon. Members that, after the storms and the growls and the heat and the heavy rains of yesterday, we return this morning to calmer Parliamentary waters. It is true that the majority of the officers and crew appear to have gone to their quarters. I do not know whether the Government have been able on this occasion to put out of action their shift system and allow a great many of their supporters to return to a four-day instead of a five-day Parliamentary week.

Mr. James Callaghan: There are only four hon. Members sitting on the Benches opposite.

Sir A. Gridley: I am not referring to the empty Benches on that side of the House any more than I am to the somewhat unoccupied benches here. It only shows that there are occasions, such as we are experiencing this morning, when the majority of Members are satisfied with the 95 per cent. of the work already done and find it unnecessary to turn up to see the conclusion of the matter.
First, I shall refer to the heavy criticisms with which I bombarded on the Second Reading, Clauses 14 to 18 inclusive of the Finance Bill as originally drawn. They were very complicated arguments which I had to press and, as I told the House then, I was not quite sure that, if I had been asked to amplify my arguments, I should have been able to do so with the clarity which we expect to receive from the Financial Secretary to the Treasury. However, I am grateful to the Chancellor and so, I think, are those responsible for industry,


for having taken the unprecedented course of wiping those five Clauses completely out of the Bill and having had second thoughts and consultations with experts outside and then introducing new Clauses from which the great majority of the formidable objections to the original Clauses have been removed, and which, therefore, proved acceptable to all quarters of the House.
If I may say so to the Chancellor, although the situation has been largely cleared up by the introduction of his new Clauses, I do not think anybody considers that the position is yet as appropriate as it ought to be on these matters, and it is well worth while that the Chancellor should consider beween now and his next Budget setting up some form of committee or commission, or some method of inquiring into this problem of pensions and retirement allowances and so on, so that we may all be agreed, as far as we can get it, upon an ideal method of dealing with these matters rather than the piecemeal and inconsistent methods which are applied at present. That is the first point I want to make while thanking the Chancellor, as I do most sincerely, for having met the arguments which were presented to him from this side of the House, I would press him to go further into the matter and add to the improvements he has affected already.
My second point, a smaller one, is the fact that the Government have not met me on this question of the immersion water heaters. The Chancellor is sometimes right and I am sometimes wrong. On this occasion, I am quite convinced that I am right and he is wrong, and I would ask him if he would invite the experts who deal with fuel efficiency matters in the Ministry of Fuel and Power—if he has not already done so—to look into this. While I cannot disagree with what he said yesterday, that there is some risk of these articles being used wastefully by ignorant people or if they are improperly installed, at the same time, if those risks can be eliminated, there is absolutely no doubt in my mind that it would be a mistake to prevent their use by keeping on this heavy tax because, looking on their use from the point of fuel economy, there is no other apparatus I know of which will provide hot water supplies in the domestic household more economically than this type of heater.
I was very disappointed that the Chancellor was unable to consider the Amend-

ment which was moved by my right hon. Friend the Member for North Leeds (Mr. Peake) dealing with changes in the classes of goods subject to, or the rates of Purchase Tax. Over and over again, not only the present Chancellor, but some of his predecessors, when brought up against similar problems have said "We would very much like to do this or that, but administratively it seems quite impossible." Hon Members will remember the earlier arguments we had when it was suggested that P.A.Y.E., or some similar system, should be introduced. We were told how formidable were the difficulties which faced any such system.

Mr. Dalton: They were.

Sir A. Gridley: They were, but difficulties are meant to be surmounted, and the Chancellor and his advisers were able to get over those difficulties. I ask him to apply the same determination to this problem because the time will come—at least we all hope it will, and I am sure the Chancellor shares in that hope—when this formidable Purchase Tax may be removed. Then we may be dealing with many millions of money which have to be readjusted between buyers and sellers. This is a real problem which has to be tackled sooner or later, and I am not at all despairing that if the intelligent minds which have grappled with these other problems are applied to this one, the Chancellor with his advisers will be able to find a suitable Clause which will meet the difficulty.
The hon. Member for Chesterfield (Mr. Benson) chided us, or rather challenged us on this side of the House to say how, if we wanted taxation reduced, we could reduce Government expenditure. That is an old method of passing the ball from one side of the House to the other. But, if there is to be real economy in the staffing of Government Departments, the only way I see that that can be done is by altering the present system of administration. The system in Government Departments is, I know, having served in them many years, archaic. No large business undertaking could carry on successfully on the lines of Government Departments. I see Mr. Deputy-Speaker looking at me with a warning eye. You were not present, Mr. Deputy-Speaker, when the hon. Member for Chesterfield introduced this subject, and I was only


attempting to make a reply to it But I take your warning at once to leave that subject alone.
Lastly, we are still faced with a period of desperately high taxation in this country which falls very heavily indeed upon those responsible for carrying on industry. I hope the Chancellor will constantly keep in mind—I know he does so pretty thoroughly—the imperative need in framing our fianancial policy of nursing industry. One thing I greatly fear in the months or perhaps years ahead is that unless we are all very careful a great many of our smaller industries will go bankrupt. This risk is not always appreciated and has not been frequently pointed out. What do we find today?

Mr. Callaghan: Profits going up.

Sir A. Gridley: The cost of wages and raw materials have risen enormously and the result is that all the stocks we have to keep and the work in progress going through our workshops require twice the capital compared with prewar years to finance it. Not only that, but if one is giving ordinary credit to customers one has twice the amount of cash standing idle. There are a great many firms today who are already beginning to feel the pinch. As the sellers' market gradually disappears, unless there is a very rapid fall in wages which no-one wants to see, and in the cost of raw materials, the time will come when those who want extra capital will find it extremely difficult to get it. That is one thing I view with apprehension for the future. We do not want to go through a period in our industries such as we experienced after the last war. I think the financial policy of the Government must not lose sight of the risk which a great many of the smaller industries are going to be faced with because when all is said and done, while we have great industries in this country, the bulk of our industrial expansion has been built up by scores of thousands of smaller firms by which the great volume of our industry is sustained.

1.18 p.m.

Major Bruce: The right hon. Gentleman the Member for West Bristol (Mr. Stanley), in the course of a series of rather skilful interrogatories to the Chair, claimed that the finances of the country were not quite so sound as

they appear on the surface. That is a rather serious statement to make The right hon. Gentleman discussed it with his usual geniality, but there are rather too many statements of this kind going about these days. I should think, especially in view of our credit position abroad, that the fewer statements of that kind that were made the better it would be. It is not only statements made in this House, in the most charming manner, which have an effect on our credit abroad, but statements made in the country at this time, in an endeavour, apparently, to run down the present state of our country for purely party aims.
The right hon. Gentleman said the Finance Bill and the financial policy should be used as instruments of planning, and in a further series of skilful interrogatories endeavoured to infer that financial policy has not been used in this way, and that the result, on the contrary, has been little short of disastrous. I wish to say straight away that I think the way in which our financial policy has been conducted has been extremely admirable and on the contrary we ought to be very proud indeed of some of the economic results which have ensued from the financial policy of the Chancellor, expressed not only in this Finance Bill, and in the previous Finance Act, but also in the current administration of finance. From time to time we witness the progress this country has made But sometimes we forget that this is a period of record employment, and that more and more people are being employed in industry, and furthermore that we are in a period when our exports in volume are achieving new heights and that the fuel and power generated in this country, despite setbacks in the coal industry, have reached new heights, and when the nation as a whole is making every show of a first-class recovery.
Furthermore, in the case of the Finance Bill, further endeavours have been made to effect a very desirable redistribution of income, and if one turns to Table 36 of Cmd. 7099, one gets some indication of the vast shift in the incomes of various categories of people that has taken place as a result of the financial policy pursued by the Chancellor, a policy which has not been challenged from any quarter. Moreover, despite the tremendous difficulties through which the country has gone, the Chancellor has, by means of the taxation


which he has been able to raise through the various kinds of machinery in the Bill, been able to maintain subsidies at a point at which food prices of basic commodities are much lower than they were in the similar period after the 1914–18 war. These are things which are remembered by our people, and which go to illustrate what I consider to be the fundamental soundness of the policy pursued by the Chancellor.
I thought that we were to have in this Debate a further dissertation about low interest rates. I observe that that has now been dropped from the financial armoury of the party opposite. They would like to argue that owing to the low interest rates prevailing the would-be ' entrepreneur or the investor had little incentive to invest his money for a lower rate return. But they do not use the argument now, for they know perfectly well that in the event of there being a demand for capital, in an enterprise considered essential by the Government, which was unsatisfied on the capital market, the Government itself would step in and provide the money. Some of the deliberate policies pursued by the Chancellor have had extremely good results in this respect. At 30th April, 1947, there were 138 factories completed in the special areas, and a further 468 were under construction. All these things, which are of great value to our people, have been possible because of the soundness of the over-all financial policy pursued internally by the Chancellor.
The right hon. Member for West Bristol said that things might be all right in internal finance, though he endeavoured to cast some doubt on that, but he added that, of course, there is always the question of the balance of payments abroad. The discussion of that subject is obviously not permissible in a Debate of this kind, in which we are concerned with the domestic finances of the country, but I think it should be said again that the bulk of our difficulties arising out of the balance of payments arise absolutely and entirely from policies which it was found necessary to pursue—and the necessity for which I do not dispute—in the war itself. There was the process of disinvestment abroad which took place during the war. There was no protest from the Conservative Party about that at that time. There was the accumulation of

sterling balances for war stores which we had to get. There was no Conservative protest about that, although they knew that those sums would have to be paid after the war. There was the provision of United States equipment which would subsequently be used for peace-time purposes, while this country was left with the bulk of the onus for providing equipment of a war-like type, or which was more explicitly used for war-time purposes, with no residual peace-time use. There was no protest about that from the Conservative Party at that time.
Our balance of payments problem arise from those policies, the necessity for which, as I say, I do not dispute, which were pursued during the war. It would come rather handsomely from Members of the Opposition if sometimes they endeavoured, in the non-partisan spirit of which they are sometimes so proud, although one does not notice it so much outside this House, to outline some of the difficulties with which the Chancellor has to contend in meeting this adverse balance of payments, because no one questions for one moment that had there not been the process of disinvestment abroad and the accumulation of sterling balances for the supply of warlike and other stores for this country, our existing exports, maintained at their present level, would easily balance our existing adverse balance of payments, and the country would be in an extremely prosperous position at the present time.
I pass from the financial observations of the right hon. Gentleman to the Bill itself. I wish to say how grateful I am, as are Members in all quarters of the House, for the handsome concession which the Chancellor was able to mike to old age pensioners. This is not a matter of world-shattering importance, but to a very important section of our community the concession was very welcome. Another act of small dimensions which now finds its way into the Bill is the concession which the Chancellor was good enough to make in respect of children's playground equipment. Those two concessions, which were given in the course of the Committee stage, have undoubtedly improved it, and they are widely appreciated.
I turn to the Income Tax section of the Bill, about which I am a little less happy.


I am in complete agreement with the provisions of the Clauses that are now in the Bill, but as I look through this Measure as it will inevitably go upon the Statute Book, and as I look through past Finance Acts and the Income Tax Act, 1945, the thought strikes me that it is getting on to the time when there should be a consolidation Bill for Income Tax purposes. The existing code of Income Tax law, going back to 1918, is rapidly getting into a most unwieldy position. Now, after 30 years, we might ask the Government whether it would be possible to consider a further consolidating Bill in order to put the matter into a much more simplified position than it is in at the present time.
In 1944 the hon. and gallant Member for Pollok (Commander Galbraith) raised in the House the question of extra-statutory concessions granted by the Commissioners of Inland Revenue. Following representations by him, the then Chancellor, the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) was good enough to publish a list of the extra-statutory concessions which had been given during war-time. It would be of great convenience, not only to industry but to the accountancy profession as well, if it were possible to have a further White Paper containing the extra-statutory concessions that have been made since the time of the last White Paper.
The type of extra-statutory concession which I have in mind is that which is not covered within the terms of law as passed by this House, such as the extra-statutory concession given during the war in relaxing the time limit in which serving people might make their Income Tax claims. Even though that is incorporated in no Act of Parliament, the Commissioners of Inland Revenue did concede that where, owing to war-time conditions it had been found impossible to lodge a claim, they would relax the rule as laid down in the appropriate Act. Since that time, a whole series of other concessions have been made and it puts the accountancy profession, which works considerably with the Commissioners of Inland Revenue to the mutual advantage of both, in a rather difficult position if these concessions are not made public.
I had hoped that when my right hon. Friend was dealing with the Profits Tax

he could have given some consideration to the position of capital profits. I hope most sincerely that before next year's Budget he may give some consideration to the arguments advanced during Committee stage for the amending of existing Income Tax legislation to this end. The United States have a tax of this kind which they find of tremendous value. Finally, I would like to -ask my right hon. Friend whether he could not give some consideration to relaxing, slightly at any rate, the rules applicable to the admission of expenses under Schedule E. I am sorry that he did not give more consideration to this during the Committee stage.

Mr. Deputy-Speaker (Major Milner): The hon. and gallant Member has made various proposals which are not in the Bill. That is not in Order. On Third Reading of this Bill he must confine himself to what is in it.

Major Bruce: I was expressing regret that the Bill had not been finally amended in the direction I desire. I am convinced that, as a whole, the Bill, as an instrument of financial policy, represents an excellent tendency in our domestic affairs. Very wise concessions have been made by way of increase in earned income reliefs, and and so on. I think this is a Bill in which the House collectively can take some reasonable pride, and I have great pleasure in supporting its Third Reading.

1.32 p.m.

Mr. Selwyn Lloyd: It would be very foolish to deny that there are one or two good things in this Bill and that the Chancellor of the Exchequer has made one or two very acceptable concessions, but I suggest that there are two general lines of criticism, to which reference has been made already. I was rather horrified to hear the Chancellor's expression that he had been able to maintain expenditure at such a satisfactory level. I believe that it is only by the reduction of national expenditure that we shall succeed in cheapening our costs of production and enabling our export trades to function.

Mr. Callaghan: The right hon. Gentleman said "on social services."

Mr. Lloyd: If the hon. Member gets to his feet, I will give way.

Mr. Callaghan: I am much obliged. There is no point in misrepresenting what


the Chancellor said. He said he was happy to sustain that degree of expenditure on the social services.

Mr. Lloyd: The Chancellor was speaking of the whole of his Budget proposals and, having referred to the buoyancy of the revenue, he spoke about having been able to maintain a satisfactory level of expenditure. That is the wrong attitude. I think it was implicit in the thoughtful speech of the hon. Member for Chesterfield (Mr. Benson) that he, too, realised that it was essential drastically to cut down the level of national expenditure. Unless we cut down the level of national expenditure I do not think that our productive industries will be able to export at competitive prices. That is a general observation and I admit that it is a sweeping one; but I hope that the Chancellor will not be complacent about the present level of expenditure.
The second general criticism is that so much of the original proposals in the Bill have been changed. Of course, one does not complain that changes have been made; one complains of the fact that changes were necessary. It makes it very much more difficult to be properly advised on these matters if there are such substantial changes as were effected in the original provisions in this Bill. Although I shall be accused of making a party point, I say that the original proposals had all the marks of the hasty work, poor craftmanship and bad finish which the country is beginning to regard as the hallmarks of Socialist legislation. Having been somewhat controversial—[HON. MEMBERS: "No."] I am delighted to hear that—I will support something of what the rather controversial Gentleman, the hon. and gallant Member for North Portsmouth (Major Bruce) said in regard to the clarification of the tax law.
I am told that this is the fourth Bill within two and a half years which has contained somewhere about 60 Clauses and a considerable number of Schedules, and that there are 40 or so existing tax Acts in force. There are many thousands of decided cases, and tax law is becoming a jungle which is impenetrable to all except the most ingenious. In support of these propositions I would refer hon. Members to the authority to whom appeal has already been made today. I will refer to some-

thing which the Chancellor of the Exchequer said in 1937. He talked of a particular tax, the N.D.C., as being:
A device for the endowment of accountants and of lawyers who batten on the uncertainties of the law and the ambiguities of our Statutes and who render no service that can strictly be called productive.
I doubt whether the Chancellor would dare to say that in this House, in which he is staunchly buttressed by the hon. and learned Member for Gloucester (Mr. Turner-Samuels) and the hon. and learned Member for Kettering (Mr. Mitchison). Really, it is a classic example of Satan rebuking sin, because he has produced three of the most complicated additions to that already complicated collection. I think that no one would say that tax law is a paradise even for lawyers and accountants. It is much more like a purgatory. Further examples are in the Seventh, Eighth and Ninth Schedules of this Bill where entirely new principles of taxation are introduced. I am advised that those Schedules will impose very great extra burdens upon a tax-collecting machinery which is already creaking and groaning. This is a serious matter. The machine is so grossly overburdened that there will be an administrative breakdown if further complications are introduced.
I also ask the Financial Secretary to remember that it is not only the tax-collecting machine that must be considered, but the tax-paying machine which also has to try to compete with these very complicated matters. I plead for the codification or simplification of the tax law. It is long overdue and would be very much welcomed by many professional people concerned as well as by the taxpaying and tax-collecting parties. An example of this further complication arises in the Clauses dealing with retirement benefits. We on this side of the House have always admitted that if evasion is proved to take place it is desirable to stop it. The cumbrous machinery of the original Clauses was obviously defective and we were very glad when they were taken back and reconsidered. But the new Clauses are also extremely complicated. I ask the Financial Secretary to say what revenue he expects to derive from the new Clauses dealing with retirement benefits. How much does he think he will get and, as a counter-balancing factor, how does that compare with the cost of administration? Is it worth the


amount which the Government will get in view of the complications and difficulties involved? After all, that is the primary purpose of levying a tax—to get revenue from it.
Next, let me say a word about the Profits Tax and the duty on bonus issues. There is a widespread belief that the purpose of those Clauses is to combine the raising of revenue with the good old Socialist practice of harming private enterprise. It is a fact that there is that belief that that is the primary purpose behind those new Clauses. We cannot call it a declaration of war, because that has already been declared; but we can call this the thin edge of a new wedge in the battle against private enterprise. The feeling is that these taxes can very easily be increased in later Budgets.

Mr. Callaghan: Hear, hear.

Mr. Lloyd: The hon. Member says "Hear, hear," so I am quite right in describing this as the thin edge of a new wedge. It is felt that it is this sort of tax which hits most just that type of private enterprise which the Government ought to assist. I think it will be agreed that our prosperity depends on the production of coal and upon the heavy industries. Wrapped up in that is the importation of raw materials, and the provision of food and consumer goods for the workers in those industries; and wrapped up in that is the making of goods for export to pay for, those raw materials and food, etc. I, personally, do not believe that our export trade can be built up on mass production. I think that is a delusion. I think that we shall have to depend very largely upon five counts, upon fine quality specialities, goods remarkable for quality, design, novelty and craftsmanship. They are the types of goods produced by the small enterprises, the small businesses. We shall also have to depend on the merchanting and marketing of that class of goods. That is the way to rebuild the export trade and the commerce of this country.
The motive in that class of business is the profit motive. Just as the manual worker, the labourer, has the incentive of higher wages and better working conditions, so in this class of private enterprise the incentive is profit. It is against that incentive that these particular Clauses

at this particular time strike with great effect. They have, in fact, operated as a cold douche for the people who are contemplating expansion in enterprises of that sort. I think such people are entitled to know whether that is the Government's policy? Do they intend to administer a cold douche to that type of enterprise? Is it the Chancellor's policy to penalise that type of small industry? Does he intend gradually to eliminate private enterprise?
At the present time there are very many people who would consider undertaking some form of expansion, some new enterprise, some new risk if they felt that it was going to be worth while. Psychologically, at the present time, the Government are doing a very great deal to discourage that type of person. It is true that the Socialist Party have declared that they propose to leave four-fifths of the field of industry to private enterprise. I do not hear the hon. Member for South Cardiff (Mr. Callaghan) saying "Hear. hear" to that.

Mr. Callaghan: I did not hear what the hon. and learned Gentleman said

Mr. Lloyd: What I said was that I understood that it was the current view that the Socialist Party proposed to leave four-fifths of industry to private enterprise

Mr. H. Hynd: Is the hon. and learned Gentleman quoting anybody's statement? From where did he learn that?

Mr. Lloyd: That statement has been made quite specifically by the Lord President of the Council, and it has been repeated many times in this House and elsewhere. It is the present position in fact.

Mr. Dryden Brook: Not in the future.

Mr. Lloyd: That is exactly what I am seeking to explore. There was a certain gentleman in Europe, as hon. Members will remember, who said he had no further territorial demands to make. What people engaged in private industry are interested in is whether, in fact, the intention of the Socialist Party and of this Government is to eliminate private enterprise. This question is directly concerned with these Clauses, and this Profits Tax, and the tax upon bonus issues. I realise that it is a question


upon which the Government, probably, are very anxious to avoid having to give an answer, but I do think we are entitled to know whether these Clauses do constitute the thin edge of a new wedge.

Mr. Deputy-Speaker (Mr. Hubert Beaumont): The hon. and learned Gentleman may discuss the thin end, but not the wedge.

Mr. Lloyd: I shall, of course, follow your Ruling, Mr. Deputy-Speaker, and discuss the very thin edge of the wedge; but I should have thought, with very great respect, that it would be very difficult to discuss the thin edge of the wedge without revealing the fact that it was the thin edge of the wedge; and I am dealing precisely with that point, whether it is the thin end or not. Your Ruling is that it is the thin end. What I want to be informed by the Government is whether it is the thin end. The answer to which I think we are entitled is one of these—"Yes," "No," "We do not know," or "We do not care"—whichever the real answer is. I think it is a very reasonable assumption that the Government, in fact, will say nothing at all about that question.
A further example of what I am suggesting is behind some of these Clauses lies in the duty on bonus issues. I cannot help feeling that the real purpose in the Chancellor's mind in imposing that tax was to tax capital appreciation, and that that is what he really desires. The essence of the limited liability company organisation of industry is the flexibility of its structure. This tax tends to diminish that flexibility. It is, in my view, exceedingly dangerous, and induces people to believe that these Clauses are fashioned as instruments for the future complete destruction of private enterprise. Hon. Members may think that I am putting forward these points from a party point of view, but I really do believe that there could be nothing psychologically better to secure increased production, and a new drive and co-operation from all sections, than a clear and unequivocal statement by the Government of their position in these matters. Do these constitute the thin edge of the wedge or not?

1.48 p.m.

Mr. James Callaghan: I have sat here quietly since 11 o'clock this morning—

Mr. Selwyn Lloyd: Not quite quietly.

Mr. Callaghan: If the hon. and learned Gentleman will let me finish my sentence, he will hear that I sat here quietly until I was so provoked by the nonsense he spoke that I sought to catch your eye, Sir. The question as to what the Government's intentions are as regards the nationalisation of industry I do not find in this Bill, but as I understand it is in Order to refer to it, and as I am quite incapable of giving any authoritative answer on their behalf, perhaps I may be allowed to say, at least, this: the Government's programme was surely set out quite clearly in the King's Speech. There it is stated, and there industry knows where it stands. To suggest that we can hang on the Clauses in the Finance Bill which deal with the Profits Tax any indication as to what future Government policy is to be is, of course, merely the stale device of a party orator, stuck for any other arguments, to catch the headlines in this evening's papers. When he says that the new Profits Tax threw a cold douche on the City, he is as ignorant of what happened in the City as he is inaccurate in his observations.

Mr. Selwyn Lloyd: I did not say anything about the City, but spoke of commercial circles.

Mr. Callaghan: They thought so badly of what the Government did in connection with the Profits Tax, that the price of shares on the Stock Exchange went up the morning after the Budget. If the hon. and learned Member is honest, he knows perfectly well that a sigh of relief went through the City and commercial circles when they knew what a small impost this tax represented, and that the forecasts as to its size were ail shown to be over-pessimistic. One of the earliest lessons I learned at the Chancellor's knee was that there is no such thing as gratitude in politics. If there were, the Opposition would have come down to the Third Reading Debate and, instead of complaining about the size of the tax, would have thanked him for imposing such a small amount that the share prices went up on the Stock Exchange the morning after the Budget.
I wish to make one or two observations arising out of some of the things which have been said, and notably to refer to the observations of the right hon. Member


for West Bristol (Mr. Stanley) in connection with our external balance of payments position. It is exaggerated to speak of the external balance of payments position as though this Government were responsible for the situation in which we find ourselves. I should like to quote to the House an extract from the recent report of P.E.P. on the financial state of this country at the end of the war. This is how it reads:
It is scarcely an exaggeration to say, with respect to our external financial position, that we have emerged from the war a defeated nation, saddled with a considerable load of reparations, the real weight of which bears a striking resemblance to Lord Keynes' estimate, in 1919, of the maximum figure of Germany's capacity to pay.
Has the full significance of that comment gone home? Here is a report which says that, as regards our external position, we emerged from the war a defeated nation. In circumstances like that, I do not think I am putting it too high to say that it is only making a cheap party point to come down to the House of Commons and blame the Government for the situation it which we now find ourselves. This report goes on to compare our position with that of other countries, and let me name them. Our external financial position is compared with that of Germany, Italy, Japan, Greece, Yugoslavia and Poland. But we won this war. I do not complain of our wartime financial policy, because little else could have been done in the circumstances. We have to recognise that we have emerged from the war in no better shape than that of the defeated nations, and it makes the task of this nation no lighter to be told in that situation, some of the sort of things which have been said today.
Another misrepresentation I complain of very much, is this reiterated statement that Income Tax is 9s. in the £, and that it is a dreadful drag on initiative for people who are working. It is purely a convention to say that the rate of tax is 9s. in the £. I should like to give the actual rate for certain levels of income. I will take the case of a married man with a wife and two children, which is the sort of case fairly representative of English family life. The man who receives £7 a week pays no taxation at all. The man with £400 a year, or about £8 a week, does not pay 9s. in the £, but 3d. in the £. The man with £500 a year pays

1s. 1d. in the £. Even in the case of the middle-class man with £1,000 a year, he is not paying 9s. in the £, but 4s. 3½d. It is not until we get to the level of £4,000 a year that the married man with a wife and two children pays tax at the rate of 9s. 1d. in the £. The number of people in this country enjoying £4,000 a year or more does not amount to one quarter of one per cent. of the population. If hon. Members opposite want to help us in our production drive, and in our campaign to get more goods in the shops, they will say in their public speeches, as frequently as I do, that it is important to recognise that the average worker getting £4 to £8 a week is paying tax, not at the rate of 9s. in the £, but at the rate of 1d. to 5d. in the £. I would not have made that point had we not had it said from the Opposition Front Bench that this is one of the causes preventing output.
I hardly think we can describe this as a big Parliamentary occasion. The right hon. Member for West Bristol said that what had happened demonstrated clearly the need for maintaining all the stages of the Financial Bill. When I look round, I begin to wonder if he has not chosen an unfortunate occasion to make that statement. I dissent completely from the view that there are no stages in our Finance Bill procedure which could not be tidied up without any loss of sensible and detailed consideration.

Mr. Assheton: Which are they?

Mr. Callaghan: Subject to reflection, the Debates on the Budget Resolutions. I do not accept the view that there is not some considerable tidying up which could be effected in our procedure.
Anyone who moves about the country today—and all Members keep closely in touch with their constituencies—knows, to put it in the vernacular, that there is less money about. There are vacant signs to be seen in some of the holiday resorts at this time, and some of the fruit is being left unsold in the greengrocery shops in some of the poorer parts of our big cities. The shopkeepers are saying that people are not buying so freely, and that all the gratuities have now been spent. This is a very difficult situation, and this is perhaps the most dangerous moment when the possibility of inflation may overtake


us. If less money is in the pockets of the people and not so much is being spent on luxuries and semi-luxuries as last year, and if that leads to further wage claims, we shall not get out of our present situation where there is still not enough goods to cover the national income.
I feel that this is an important moment for wage claims not to be prosecuted. That being so, it is equally important for the Chancellor to do nothing which would increase the cost of living. No attempt should be made to disturb food subsidies in any way. I can conceive of nothing which would be more disastrous, at the present time, than a substantial attempt to cut them down. Although I know that the Chancellor has an ear for music, I hope he will not listen to the beguiling voices of the sirens of the "Economist", or the more discordant noises uttered from the benches opposite. We are passing through a ticklish time, and I trust that the cost of living will be maintained at a stable level, because I believe that that is one of the best ways in which we can get over the present inflationary hump.
Rightly or wrongly, the workers have the feeling that there is a lot too much money being thrown about to shareholders. They see distributed profits going up; they see additional profits being made, and there is a feeling that if dividends are going up why not wages? I said this time last year that it was a bad thing to distribute profits at the rate at which they were being distributed then. The situation has become worse. There is more money being distributed in profits. I do not see that the Chancellor's new tax, of which the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) complained, will stop that. I wish it would. I wish that the new tax on distributed profits was of such a height that it would limit distribution to last year's level. But the truth is that there is so much money being made that companies can set aside money to pay for this tax while increasing their dividends. That is much more against the national interest than it was even at this time last year.
I say to the Chancellor that if he cannot rely on profits being kept within reasonable bounds—and they are not being so kept today—he is entitled to take action to stop it. We know that if all the profits

that are now distributed to shareholders went to the workers in industry they would not put up wages by more than a flick of the finger. We know what the relative proportions are which go in wages, taxation, and profits. But there is a psychological point about this matter. If shareholders who are not lifting a finger to assist the export drive are to continue to get substantially increased dividends for doing nothing, then it is impossible for trade unions to hold in check their members who say, "Let us have a share in what is going."
I would like to make a brief reference to the alarming suggestion by the hon. Member for Harwich (Sir S. Holmes), that we should abolish Surtax. When the hon. Member was making this suggestion I noticed that the right hon. Member for West Bristol (Mr. Stanley) left the House. I do not blame him; he must have been thinking, "Save us from our friends," bearing in mind the new alliance which has been made between the Liberal Nationals and the Conservatives. Why was his proposal not put in the Industrial Charter? What a good advertisement—"Vote for us, and we will abolish Surtax." Is it really thought fit that we should debate in this Chamber a proposal that the wealthiest members of the community should be exempted from the impost they have had to bear for many years, at a time when the cost of living has risen, and ordinary men and women are finding more difficult to live? I thought that what the hon. Member said was the last word in irresponsibility.
I want to say this about the Surtax and Surtax payers: that the tax machine has become blunted in its efforts to catch Surtax payers. It is a tax on income. No one has ever defined income, not even learned judges, who can define anything if we are to believe the lawyers in the House. There are many payments going into the hands of wealthy people which are not caught by the Income Tax Acts. That is the reason why, when they are supposed to have been soaked out of existence, they are able to maintain a standard of life which is obvious to all of us who walk about with our eyes open. This Income Tax machine is not catching a large number of payments that are going into people's hands, and which, under the ordinary definition, can be described as income. That is a serious matter, and one


to which the Government must pay careful attention. There is a large sum of money trickling through the Chancellor's fingers. The Surtax payers, who were described by the hon. Member for Harwich as having been soaked, have found a way of getting out of the rain. We must bring that to an end.
This Budget, as has been said, is one of a series, and is to be regarded in that light. I am sure that my right hon. Friend the Chancellor is doing his job in the right way. He is relieving the poorest first, and maintaining a high rate of tax on the rich. I rejoice in that, because I am certain that it is in accordance with the conscience of our people, the principles of social justice, and one of the best ways of maintaining the morale of the people who work. I therefore congratulate my right hon. Friend on his Budget, and I am only sorry that I shall not have the opportunity of going into a Division Lobby to support him.

2.8 p.m.

Lieut.-Commander Gurney Braithwaite: We always listen with pleasure and attention to the hon. Member for South Cardiff (Mr. Callaghan), and I recall that when I had the honour to deliver "The Week in Westminster" broadcast, on the Saturday after the Budget, I said of the hon. Gentleman that no one who saw his agreeable appearance would realise that he came to us originally from the Department of Inland Revenue. The remarks he has just delivered to the House are those of a tax gatherer, rather than a tax payer, and there is a great gulf between the two. I was not surprised to hear the hon. Member suggest that the Government should follow up their attempt to muzzle the Press by gagging the House of Commons on financial matters, by abolishing any kind of discussion on the Budget Resolutions. It is the kind of recommendation which one would expect from the quarter from which it comes.
During the long course of this Finance Bill, a number of welcome concessions have come our way. The Chancellor generally has a few million pounds, in the way of petty cash, available for disbursement as we go along, and nothing could exceed the geniality of his manner of avuncular bonhomie as he hands back to the taxpayers meagre allotments of

their own money. Important changes have been made in this Bill. The deletion of the original Clauses 14 to 18 in toto, and the substitution for them of other and more equitable Clauses, did show what can be done by the House of Commons in discussions which seem so irksome to the hon. Member for South Cardiff.
We have had our moments of anxiety. One has never quite known in what mood the Chancellor of the Exchequer would be on any particular day. There has, for instance, been the way in which he has blown hot and cold—and I say this literally—upon electrical apparatus and the Purchase Tax connected therewith. There have been days of uncertainty, and I am reminded of a village which I knew many years ago where there lived an old gentleman of considerable means, but with a temperament which alternated sharply between generosity and parsimony On one Easter Sunday, he was so moved by the eloquence of the vicar that he hurried round to the vestry and wrote out a handsome cheque for the Easter offering, thereby causing that good man two days of acute mental anxiety because, knowing the banks to be closed on Monday, he was not sure when he presented the cheque on Tuesday whether the effects of his sermon would have worn off and his cheque have been stopped. I am glad to inform the House that in that particular case all was well.
It was through this kind of apprehension that we passed during the Committee stage when discussing these matters The Chancellor, of course, was under some handicap. He had to reflect the financial mental somersaults of the Minister of Fuel and Power in these matters. One wonders what conversations have taken place between the two right hon. Gentlemen outside the precincts of this Chamber and whether they could be quoted in Parliamentary language, and one wonders what the Chancellor has to say to the Minister of Fuel and Power, because, I take it, that it is to him he has to refer, having no direct access to Mr. Arthur Homer. The Minister of Fuel and Power has placed upon the Chancellor the necessity for these rapid changes in the matter of heating apparatus. The Chancellor has had to bear many burdens in the last 12 months. He has had, of course, to budget for heavy taxation to deal with some of the mal-administrations of the Minister


of Food—buying dried eggs from America by bulk purchase because 200,000 tons of non-maltable wheat last autumn were not switched over to poultry feeding—a complaint which has descended on the right hon. Gentleman with drastic consequences.
I think that the Finance Bill of 1947 and the Budget that preceded it, will chiefly be remembered for two items—first, the Tobacco Duty, and secondly, the right hon. Gentleman's ham-fisted treatment of the old age pensioners. The hon. and gallant Member for North Portsmouth (Major Bruce) expressed his gratitude to the Chancellor for this concession. May I remind him that the old age pensioners are still waiting, that one-third of the financial year has passed, and the full weight of that increased tax is still being borne by them. I think that some consultation ought to have taken place between the hon. Member for South Cardiff and the hon. and gallant Member for North Portsmouth before they delivered their speeches.

Major Bruce: Is it not then a case for welcome because it has not yet come into operation?

Lieut.-Commander Braithwaite: It will be welcome when reflected in the price of tobacco, and not before. This is not governed by good intentions. I am pointing out that one-third of the year has passed and that for four months these old people have borne the increased weight of this Tobacco Duty. It is incredible that before it was ever put on, that factor was not borne in mind. The hon. Member for South Cardiff tells us that we are a defeated nation—the awful weight has fallen on us. The hon. and gallant Gentleman the Member for North Portsmouth said that all was well; he was looking forward to the great benefits to come to the people; the Chancellor's administration had been beneficent and so on.
The chief feature of this Finance Bill is the Profits Tax. We have had a good many speeches about that. The hon. Member for South Cardiff has told us what an admirable thing it is going to be in raising the morale of the people. One never knows quite of whom hon. Members opposite are speaking when they say that they are speaking for the people. I imagine that he feels that all is well because the Co-operative hierarchy has been

excluded from the full weight of this increased Profits Tax. The Government are looking after their political friends.
One cannot pass from the Finance Bill without a word on the subject of expenditure. It is the technique of hon. Gentlemen opposite, as, indeed, it is of the Chancellor, to over-spend the national income and then to say to the Opposition, "What would you cut?" Here are all these benefits flowing from the Exchequer, and national income is deteriorating almost every day that passes. They say, "What would you cut?" That has never been the business of the Opposition. The duty of the Opposition is to point out where we think administrative mistakes have been made. May I illustrate that by a story which is entitled to respect on account of its age?

Mr. Follick: Does the Budget deal with expenditure?

Lieut.-Commander Braithwaite: If the hon. Member will study that or any other balance sheet, he will find that it has two sides. If he will examine the national accounts or any other accounts he will find—and this is the chief difficulty, after all, of Socialism—that there is expenditure in addition to revenue. If one could only continue to spend without revenue, all would be well. I am very glad that is not so. The object of this Finance Bill is to endeavour to provide the necessary apparatus for that procedure. I was going to say, when the interruption occurred, that the policy of the Government on this matter of expenditure is best illustrated by the story of the family which had got into grave financial difficulties owing to extravagance. They formed themselves into a committee of ways and means to discuss the situation. After a long family conclave they reached a decision, with one dissentient, on how to put their affairs in order. It was that the kitchen matches in future should also be used in the drawing room, that father should give up smoking, and that he should work harder. That is as far as the Government have got in this matter.
Family finances fall into unbalance owing to expenditure on things that cannot be afforded. Perhaps, in a family, the income of the father is not equal to sending his children to expensive public


schools where he may desire them to be educated, if only for the purpose of rubbing shoulders with the sons and daughters of Socialist Ministers. Perhaps it may be due' to expenditure on restaurants or theatres. The fact remains that in the family, if there is over-expenditure, cuts have to be made. The gravamen of this is upon the Government. I am wondering whether they are going to repeat the events of 1931 when the Socialist Government of that day appointed the May Committee to try to deal with the question of over-expenditure, and then ran away from their recommendations. The Government have appointed a Plowden Committee, and unless I am greatly mistaken that Committee will tell them at no distant date that if the national economy is to continue and if good planning is to be possible, there will have to be heavy cuts in national expenditure.
These are gloomy reflections perhaps for a Friday afternoon. We have had a long pilgrimage since 15th April and many interesting Debates, which will become more interesting probably in retrospect than they are now. As he is on the Front Bench at the moment, I should like to say how much we always appreciate the diligence with which the Financial Secretary to the Treasury has carried out his duty when he was sent in to stonewall on a bad wicket. When there is a concession to be made, the Chancellor comes along and makes it, but the Financial Secretary is put up to explain preferential treatment for the Co-operative societies, or why this or that concession cannot be made, which he always does with unfailing good temper. We noticed him ageing as the Finance Bill proceeded, and his brow got more and more furrowed as he had to listen to more speeches from the hon. and gallant Member for North Portsmouth. We wish the right hon. Gentleman well.
If the Chancellor, who is no doubt profitably engaged somewhere else, but who will be with us before we close, were here I would make a recommendation to him. I understand that before he introduced the Budget he spent a few days in the country listening to the songs of the birds. It was at a time when the cuckoo is first heard in this country. He went with the Minister of Agriculture, who returned to us with a careworn expression and seemed to

show some signs of deafness after those days in conversation with the Chancellor. Let us hope that the Chancellor will take advantage of the Summer Recess to return to those haunts and there to gain inspiration for new songs, and that his rural ruminations will lead to greater arithmetical accuracy.

2.23 p.m.

Mr. Follick: I am only going to raise a couple of questions. There have been remissions made in this Bill with regard to Stamp Duty, but I should like special consideration to be given—I do not know whether it has been given—to the double Stamp Duty on conveyances of land purchased by local authorities on behalf of the community. In Loughborough, we recently purchased 25 acres in the middle of the borough for £27,500, on which the Stamp Duty would have been £275, but is now to be £550. The local authority, in raising the money, will also have to raise the money for the Stamp Duty which will not only mean extra capital but extra interest accruing on the debt. I would, therefore, be very glad to hear from the Financial Secretary whether consideration has been given to this matter, because this is a question for the community upon whom this extra payment will fall very heavily. That is a pity when the local authority is buying land for the welfare of the public.
My second question is one on which I feel very greatly: I deplore the fact that the Chancellor did not see his way to withdraw the Purchase Tax from toothbrushes. I had every sympathy with the Opposition on that, and I had a lot to do to withhold myself from walking into the Lobby with them. However, I abstained from voting on that occasion. This is a matter on which I feel very deeply, for two reasons. The first of these is that I am 60 years of age and I have been able to keep all my own teeth because I have used consistently good quality toothbrushes. Everybody should have the same opportunity. Only recently in our own paper, the "Daily Herald," there was an announcement about special preference to be given to children for dental treatment. Why give them special preference for dental treatment unless they are also given the wherewithal to complete that dental treatment? Throughout my life I have been very careful on this question of toothbrushes.

Lieut.-Commander Braithwaite: On a point of Order, Mr. Deputy-Speaker. Is it in Order to make up for the lack of newsprint for advertising purposes by advertising these commodities in this Chamber?

Mr. Deputy-Speaker: If I thought it was out of Order, I would have stopped the hon. Gentleman.

Mr. Follick: Seeing that I agree with the Opposition on this question, why make a point of Order out of it? Every day I have always used three toothbrushes. One is actually my own design and has been registered by a firm in this country. It is the only rotatory toothbrush in existence.

Lieut.-Commander Braithwaite: It is advertising.

Mr. Deputy-Speaker: I think the hon. Member has probably made his point now, and he should get back to the Bill.

Mr. Follick: There is a second reason why I deplore the fact that the Purchase Tax on these brushes has not been removed. I have been a language-teacher and the teeth are almost as important for speaking a language properly as is the tongue, and that is more so with the English language than with any other language in existence, except Japanese. [Laughter.] This is no laughing matter because English is a strongly developed odontological language. The front teeth are used to a tremendous extent.

Mr. Deputy-Speaker: I have to ask the hon. Member to return to the Finance Bill.

Mr. Follick: With all due deference to your Ruling, Mr. Deputy-Speaker, I am deploring the fact that Purchase Tax still exists on toothbrushes under this Finance Bill. I am giving the reasons why I deplore it. I think that the nation would gain in health, and what we would gain by being able to take full advantage of this instrument of speech which Providence has given us would be, in itself, sufficient reason not only for abolishing the Purchase Tax but even subsidising toothbrushes, so that everybody would enjoy the benefit of having good teeth, and be able to speak their language and enjoy good health.

2.30 p.m.

Mr. Christopher Shawcross: I do not think that this Bill should receive its Third Reading without at least a small mark of congratulation and praise from his own back benches for the Chancellor's courageous action in agreeing to the alteration of the taxation system on private motorcars. The hon. Member for Chippenham (Mr. Eccles)—the cause of whose absence today I am sure the whole House deplores—said during the Committee stage, in reference to that proposal, that he thought that it was the most important reform and indeed the most important Clause in the whole Bill. I would not go as far as he did in stating that so categorically. It remains to be seen whether the condition created for the motor industry will he used by that industry for the purpose for which it was designed. It is entirely a matter which remains to be proved in the future, and perhaps not even in the immediate future, but I think that the Chancellor is to be congratulated from all sides. After all, this was not in any sense a controversial or party matter, and it is right that it should be recorded that in spite of the difficulties of his predecessors, and particularly his own difficulties a year ago in his discussions with the industry, and in spite of the uncertainties which that previous experience had produced, he nevertheless took the opportunity on this occasion to undertake this long-overdue reform.

2.32 p.m.

Mr. Assheton: We have had an interesting Debate today in which there have been some most valuable contributions from hon. and right hon. Members on this side of the House and some interesting, though not always so valuable, contributions from hon. Members opposite. I am inclined to think that the speech of the hon. Member for Loughborough (Mr. Follick) was the high spot I entirely agree with the views he holds about toothbrushes, but I had hoped that from one who, I find, was once secretary to the late Emperor of Morocco, we should have a rather wider survey of our financial position as a whole than that to which the hon. Gentleman treated us this afternoon.
The Bill which is now passing through its final stage today is not one which we on this side of the House can commend


very highly. I do not propose to weary the House by going through it in great detail. Hon. Members already know my views on many of the different Clauses since I have intervened from time to time during earlier stages, but I want particularly to say a word about the general financial position. To my mind the Chancellor of the Exchequer has been continually making claims which are a very long way from the truth. He has been claiming that the financial situation in our domestic affairs is a satisfactory one, and that he has a balanced Budget. We have argued before from these benches that the Budget surplus is in fact bogus, but whether it is bogus or not, it is quite certain that the Budget has been balanced, if it has been balanced, only by maintaining taxation at inordinately high levels. The outstanding feature of the whole Finance Bill is the alarming level of taxation and the alarming total which is to be raised by it.
If hon. Members will look at the Financial Statement, they will observe that the total estimated to be raised from taxation during the current year is just under £3,000 million, which is considerably higher than the total amount proposed to be raised from taxation during the previous year. After a year has passed—a year further away from the war—the total amount of taxation to be imposed on the people is considerably higher than it was last year. My right hon. Friend the Member for West Bristol (Mr. Stanley) pointed out in his opening remarks today that it was held by many economists that there was a certain ratio of taxation to the income of the people which could not be exceeded without the most dangerous consequences to the whole economy of the State. He put a question to the Chancellor of the Exchequer and I repeat it to the Financial Secretary. Does he think that the present ratio of taxation to the income of the people is one which can be sustained without the most serious consequences to the whole of our economy? I suggest that such an enormous proportion of the income of individuals cannot be taken away without causing inflation.
A third, at any rate, of all incomes in the country is taken away, as this White Paper shows, and as my right hon. Friend pointed out, the key Clause to the whole Bill is Clause 9 which fixes the rates of

Income Tax. The hon. Member for South Cardiff (Mr. Callaghan) made some interesting observations about Income Tax, and I should like to say something about them. The evils of a very high rate of Income Tax are numerous and well known, but there are one or two that are not perhaps always fully considered. To begin with, I would remind hon Members that a considerable part of this taxation is being paid by individuals out of capital or savings, quite apart from the £155 million to be raised by Death Duties which, of course, all comes from the capital payments on estates of individual taxpayers who are deceased. In addition to this and to the fact that numerous individuals are obliged to pay their taxes out of capital resources, the point on which the hon. Member for South Cardiff spoke was the question of incentive, which was also mentioned in the speech of the hon. Gentleman the Member for Chesterfield (Mr. Benson).
The hon. Member for South Cardiff sought to make out that because the total incidence of the rate of taxation at the lower levels of income was not necessarily 9s. in the £ the effect of this heavy taxation on incentive was not really as great as one would imagine. I challenge him on that very much. The incentive which is diminished by high taxation is an incentive which applies to all classes of taxpayers in the community. It is not at all restricted to one class or another—to capitalists, wage earners or professional men. In my opinion all of those are restricted in their incentive by a high level of taxation. Let me take the wage earners first as they are by far the most numerous of the tax paying sections of the community. Wage earners are not attracted by requests to work overtime when in fact that may mean that income tax at 9s. in the £—or at any rate 6s. in the £—becomes payable. If, for instance, one earns £1 a week in overtime but receives only 11s. of it, one may find that the overtime rate is in fact lower than one's normal rate of pay, whereas the average worker expects to receive more for working overtime than when he is working during his normal hours. That is one point I would try to impress on the hon. Member for South Cardiff. I quite appreciate the point he made, but he must also appreciate that there comes a time, particularly in regard to overtime earnings, when the high level of taxation—the rate of Income Tax men-


tioned in this Clause—has a very considerable effect. The experience of all hon. Members bears out that contention. It is constantly put to us by various sections of the community and by trade union leaders.
The next category of taxpayer I will mention is that of the professional men. There is no doubt whatever that a number of professional men, particularly those who already have considerable practices, are unwilling to take on additional work when it may mean that their additional earnings are taxed at anything between 9s. and 19s. 6d. in the £. One can illustrate that from the medical profession, the legal profession or the accountancy profession, and one knows it is true from one's own experience. It cannot be denied by any hon. Member that a number of individuals are definitely restrained from adding to their commitments at the present time. The third section are the capitalists. There are capitalists of all sorts. Take the capitalist who is engaged in some business which carries with it a very considerable amount of risk.
Only this week I was talking to a member of a firm which has traded for many years—almost for many generations—with the Far East, and he told me to my great regret that his firm was abandoning its trade with the Far East, a trade which had brought great profit to this country as well as to that firm and which had brought great benefits to the balance of payments of this country in earnings in foreign exchange and so on. Why is that firm abandoning that trade? It is because the rate of Income Tax and Surtax which the proprietors of that business are paying is so high that it is entirely out of relation to the very heavy risks they have to run in engaging in trade in the Far East. I give the House that as an illustration of what actually happens. That is a true case, and there are many others of the same kind. All the loss falls on the individual trader or capitalist, but, when it comes to making a profit, as much as 19s. 6d. in the £ is taken in the higher levels of income. Therefore, it is not surprising that men who have substantial capital resources are not anxious to embark them in such conditions when the whole of the risk falls upon them and hardly any of the profit, if profit is made, accrues to them. I do not know whether

that will be challenged in any quarter of the House. I genuinely believe that example to be representative of large numbers of people throughout the community.
There is very little temptation to people to work harder and be more enterprising and very little incentive to work additional hours. What happens? Numbers of people in the country are seeking ways of getting money not subject to tax, a point which was dwelt upon by the hon. Member for South Cardiff and others. It is obviously owing to this high taxation that it is more profitable than it was ever before to seek means of getting money without paying tax. If you know the word, Mr. Deputy-Speaker, it is the "spiv" who is making the money. He is the man who knows how to get round controls, how to avoid taxation and how to make a quick profit on the rising market which the inflation has caused. That is all due to high taxation, and it is the Chancellor of the Echequer who is responsible for the "spiv economy" into which the country is gradually sinking. He is responsible by reason of the high rates of taxation which he insists upon imposing.
I am sure that all hon. Members, and certainly you, Mr. Deputy-Speaker, are conscious of the dangers of inflation. It is my belief that the low level of productivity in our economic system at present, which all hon. Members observe and regret in many spheres, is the most powerful inflationary influence of the lot. All sorts of causes of inflation are talked about. There is the cheap money policy of the Government and the capital expenditure which is excessive in relation to the savings that are made; but to my mind by far the most important cause of inflation is the low productivity into which we have sunk. Why have we sunk to such a low level of productivity? I am absolutely certain that output is low in many cases because incentive is reduced by excessive taxation, and that is how the argument I am using is directly tied up with Clause 9. The excessive taxation has the inevitable consequence of reducing productivity in almost every sphere of activity in business, trade and commerce.
When output declines and productivity is low, incomes do not fall proportionally to the loss of output, and consequently the inflationary gap is increased.


We are quite clearly getting entangled in a very difficult vicious circle and it is quite essential, although it is difficult, to break through that vicious circle somehow. One of the ways in which the Chancellor must try to break through is by substantially reducing the rate of Income Tax. It may have been suggested in some parts of the House that it would be inflationary to reduce Income Tax because the public would have more to spend, but I beg him to realise that that idea is much exaggerated. The increased productivity which would be generated over the whole field of industry and commerce would far offset any danger there might be of increasing inflation from that cause.
The Chancellor is continually telling us—and rightly so—of the serious foreign exchange situation and the difficulties of our balance of payments and so on, and I am not one of those—neither is any hon. or right hon. Gentleman on this side of the House—who tries to maintain that the difficulties of our foreign exchange position are entirely caused by this Government. No such suggestion has ever been made by me. I would never make it. I had the privilege and also the difficulties of being at the Treasury during the war and I know something about these things, but although I think it is useful to distinguish between external and internal financial and economic problems, I entirely agree with my right hon. Friend the Member for West Bristol that the Chancellor is carrying too far the habit of trying to think of them in separate compartments. They are not in separate compartments. We have to see how the whole thing fits in together.
The Chancellor of the Exchequer is constantly telling us how grieved he is about the foreign exchange situation and what the difficulties are. At the same time, he is very jaunty and very boastful about his own Budget surplus, about the internal financial position of the country—very jaunty—"Not so bad for a Labour Government, what?"—and all that kind of thing. I suggest to him that it is not only a dangerous attitude, but an entirely false attitude to adopt. I want him to realise that it is internal extravagance and internal overspending—

Major Bruce: Where?

Mr. Assheton: —by public authorities and by private individuals, which is one of the chief causes of our adverse balance of payments. The pressure to spend forces itself not only upon goods that are produced in this country but also upon goods that are produced overseas, and every increased pressure to spend increases either pressure for overseas goods or puts pressure on some goods that have been produced in this country which, if they were not being produced, would leave more room for production for the export trade. There is not the slightest doubt that the excess expenditure in this country, by individuals, by local authorities and the Government, is one of the primary causes of our difficult dollar situation, and the sooner hon. Members and the Government recognise that, and act accordingly, the better it will be for all of us.

Major Bruce: Would the right hon. Gentleman specify a little more closely where these extravagances and wastes have taken place?

Mr. Assheton: I think the hon. and gallant Member knows very well that we are now in the Committee of Ways and Means—

Major Bruce: We are not; we are on the Third Reading.

Mr. Assheton: I beg your pardon, we are on the Third Reading of the Bill which originated in the Committee of Ways and Means. If the hon. and gallant Member cares to read this copy of Dod's Parliamentary Companion, he will appreciate that the Committee of Ways and Means provides an opportunity to discuss the raising of taxation, but one is not entitled in the present circumstances to discuss matters which should be discussed in Committee of Supply.

Major Bruce: But the right hon. Gentleman was challenged in Committee to produce details of these extravagances and places where cuts could he made, and the Opposition could not do it. Surely, within the limits of Order, the right hon. Gentleman can do it now?

Mr. Assheton: I do not think I can do so within the limits of Order. I will ask Mr. Deputy-Speaker.

Mr. Deputy-Speaker: I am afraid the right hon. Gentleman cannot do it here.

Mr. Assheton: I was afraid this would not provide an opportunity for expressing where these cuts should lie, but in any case, I am making a case this afternoon that the Government are spending much more money than the people of this country can reasonably provide by taxation.

Mr. Sargood: The right hon. Gentleman is making an allegation, not a case.

Mr. Assheton: I am making an allegation and I hope a case too. I suggest that it is the responsibility of the Government to decide where these cuts have to be made. They have all the information at their disposal, they know the facts, they can cover the whole field. We see merely a part of it. In any event, I know that the hon. and gallant Member for North Portsmouth (Major Bruce) is always trying to draw a red herring across these discussions by raising this point, and I shall not fall into his trap this afternoon.
I was making the point, which I am satisfied is a good one, that internal expenditure in this country is one of the chief causes of our dollar exchange difficulties and our foreign exchange difficulties generally. I suggest that the internal situation needs clearing up. That is the first thing we have to do, and then we shall be able to see our way a great deal more easily about our overseas position. In the end, we must go back to the old-fashioned remedy which is economy in public spending and a sound budgetary and monetary policy. Sound money and reduced taxation are amongst our greatest needs, and this Finance Bill contains proposals for excessive taxation, and it is not based on sound money. As will be observed in Clause 57, there are provisions for the permanent charge for the National Debt. The Clause provides that the permanent charge for the National Debt shall be raised from £355 million to £525 million. That is to be the permanent charge for the National Debt.
The constant rise in the charge for the National Debt in time of peace is a clear proof that overspending is going on and I suggest that we are all living in a fool's paradise. There is no remedy except harder work and severe economy and sound money. Those are the remedies and it is not the slightest good the Chancellor of the Exchequer and others screaming at us to save when he himself taxes us so

high that we have no chance of saving. The Chancellor himself is the man who should save. He is the greatest spendthrift this country has ever known and, unless this policy of extravagance is checked, nothing can stop the most severe financial and economic crisis. I say that with all seriousness. I say it not only as the Member for the City of London, but also as one who has had some experience at the Treasury, and I hope that the House will not entirely disregard the warning.

2.56 p.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall): We have had about a dozen speeches from various sides of the House and it would be impossible for me in the time which I should allot myself to cover everything that has been said. [HON. MEMBERS: "You have an hour."] For one thing, I am of the opinion that if I attempted to answer all the points that have been put, I should be out of Order. We are dealing with the Third Reading of the Finance Bill, and the utmost limits to which one should go is the whole Bill and nothing but the Bill. Quite a number of the speeches, which have been interesting, have gone rather outside the limits of a Third Reading Debate. Some hon. Members have discussed expenditure, and there is nothing about expenditure in this Bill. It deals, as the right hon. Member for the City of London (Mr. Assheton) said, with Ways and Means rather than with Supply.
On the whole it has been a friendly Debate. At times, in the earlier stages, I began to imagine that I was inside a church, it was so subdued and so orderly; at other times I thought the entertainment supplied was excellent, and I was glad to be here to enjoy it. Particularly I was delighted with the speech made by the right hon. Gentleman the Member for West Bristol (Mr. Stanley) as, I am positive, were all who heard it. As usual he treated us to a speech which was polished and witty and, if I may say so, although most of the shafts were aimed at the Chancellor, these were all so good-natured that no one enjoyed them better than my right hon. Friend. There was, however, very little in his speech which requires an answer. Most of it was assertion and not query.
However, the right hon. Gentleman raised two points which I will endeavour


to answer. He put one question, which was repeated by the right hon. Member for the City of London, whether in the view of the Government the rate of taxation now was such that we could view it with equanimity and whether, taken in relation to the national income, we thought it could go any higher. It is not the intention of my right hon. Friend to put up taxation; it is his intention, given what we hope will be the march of events in the next two or three years, at the earliest moment to bring taxation down. He has already brought it down to a considerable extent since he has been in office, particularly for those who, during and since the war, were least able to bear it.

Mr. Assheton: May I remind the right hon. Gentleman that, as I have said, the amount of taxation to be raised this year is higher than the amount which had to be raised last year. The total is greater; it has not been reduced.

Mr. Glenvil Hall: The total is greater, but in actual fact the incidence of taxation on the individual, particularly the direct taxation on the individual, is considerably lower in the case of large numbers of the population. The right hon. Member for the City of London, in following up the point made by the right hon. Member for West Bristol, indicated that one-third of all incomes was taken away. That, of course, is not true. It does not work out that way at all. It may well be, as the right hon. Gentleman said, that something like 7s. in the £ of the national income is now taken by way of taxation, but that is over-all taxation. Nothing like one-third of all incomes is taken from individuals, as individuals. Anyone who looks at the White Paper which is supplied to us all when the Budget is opened every April, will see, as my hon. Friend the Member for South Cardiff (Mr. Callaghan) showed in a very excellent speech, that incidence of taxation does not amount in any case now to 19s. 6d. in the £. Even on an income of £100,000 it means no more than the over-all effective rate of 18s. 9d. in the One hundred thousand one-shilling-and-three-pences are worth picking up.

Mr. Stanley: Is the difference between 18s. 9d. and 19s. 6d., 1s. 3d.?

Mr. Glenvil Hall: It is not the difference between 18s. 9d. and 19s. 6d., but the difference between 18s. 9d. and £1. I was in process of showing that 100,000 times 1s. 3d. is worth picking up, and is more worth picking up than 100,000 sixpences, which, according to the argument of the right hon. Gentleman, quite a lot of well-to-do people are left from their incomes. As a matter of fact, the right hon. Member for the Scottish Universities (Sir J. Anderson) only left them 1s. 2d. My right hon Friend has gone a penny better for these extremely hard-pressed people who come within the £100,000 a year income rate. But, as my hon. Friend the Member for South Cardiff pointed out, now the ordinary workingclass home has benefited considerably by the change in the incidence of taxation which this and previous Finance Bills has put into operation. Now a married couple with two children have to earn over £7 a week in order to come within the income tax paying class at all. The man who earns nearly £10 a week has only to pay about 1s. 1d., whereas when the right hon. Member for the Scottish Universities occupied the position now occupied by my right hon. Friend in a previous Government, a person with £10 a week was not left anything like the amount which my right hon. Friend has left him.

Mr. William Shepherd: Do those figures include indirect taxation?

Mr. Glenvil Hall: We are talking about Income Tax and Surtax, and I was trying to answer the point made by the right hon. Gentleman on the Front Opposition Bench. One other point made by the right hon. Member for West Bristol was that he did not think the changes made in this Bill in regard to the licence duty on motor cars would have the effect which many people claimed.
My right hon. Friend has never claimed that this change will make all the difference which some people think will result from it, but it is his hope, as I am sure it is the hope of every one, that this change to a flat rate of £10 on all new cars will assist the motor industry in this country to achieve a great home market and certainly a greater export market. My right hon. Friend has, in fact, done no more than follow the advice which has been offered to him. Last year that


advice was of a different kind from that given this year. I think my right hon. Friend is to be congratulated on having. at the request of the trade, put one form into one Bill one year, and then, when the trade had had second thoughts, having been willing to change it the following year. We all hope, and we can only hope, that what is now being done will assist in the direction we all desire.
I have, for many years, known the hon. Member for Harwich (Sir S. Holmes), who intervened this afternoon. He first swam into my ken when he was one of the rising hopes of the Radical Party in London. I am sure that in those days he would never have forecast the future sufficiently to have prophesied that he would stand up in this House and urge that the first thing to be done by this Government, with all the problems they have on their plate, and with all the injustices that have to be undone, was to drop the Surtax, which at the present moment is bringing in £80 million. It will be quite impossible either for my right hon. Friend next year, as I think the hon. Member suggested, or for any other Government, whatever its complexion, to drop the Surtax. It would be completely unfair. The hon. Member also made the point about taxation at 19s. 6d. in the£ and the deterrent it was. We all admit that taxation is a deterrent to effort, but I do not think it is the deterrent he imagined, and in any event the tax does not rise to that level in its early stages as he seemed to think.
I would remind him, and the other hon. Members opposite, that the Government have done a great deal to help industry. I hope that I am not misinterpreting him, but his argument rather tended to the belief that the Surtax payer was predominantly a private individual with means, who was taking risks. Surely, that is not true. Industry may take risks, but Surtax only comes into operation when profits have been made and paid to the individual. What this Government have done, and I think they have done the right thing, is to give what help they could, not to the person with a very high income who comes within the Surtax range, but to the small man; in addition, help has been given in various ways to industry directly. The effort and provision to assist industry began in the first Budget which my right hon. Friend opened in

this House in 1945, and has been continued through the other Finance Acts which have been passed through this House up to and including the present Measure, with which we are now dealing. Therefore, it is unfair and untrue for either the hon. Member or anyone else to say that Surtax prevents industry from functioning or from taking such legitimate risks as industry must take.
The hon. Member for Stockport, (Sit A Gridley) wanted to know whether a Commission could be set up to consider the whole question of pensions and retirement allowances. Commissions are expensive things. Frequently they sit for a. very long while, they eat into Civil Service staff, they come to conclusions which often are not unanimous and, when their con. clusions are come to, all that happens is that their report is filed away, put into a pigeon hole and forgotten.

Mr. Stanley: The Commission on the Press?

Mr. Glenvil Hall: I would be out of Order in referring to that, but I think may promise the right hon. Gentleman—. not that I have any influence in this direction—that the procedure which I have just described in reference to many Commissions in the past under less advanced and less progressive Governments than the present one, will not happen to the Commission on the Press which is now sitting. Though Commissions may sometimes be desirable, we must only have them when the matter in hand is of sufficient importance to warrant the use of staff and all the rest which is involved. This question of pensions is not one for a Commission, but it certainly is a matter that might be looked at. I think I can promise that it will be looked at by the Inland Revenue.

Sir A. Gridley: The Financial Secretary was not here when I made the suggestion, and I think he has been misinformed. I did not confine myself to a Commission. I referred to some kind of inquiry or Committee.

Mr. Glenvil Hall: I apologise. I was no, present. The note given to me when I got back was to the effect that the hon. Gentleman wanted a Commission. I think I can promise him that inquiry will be made. As he and the rest of the House know, the Clauses upon which he raised this matter, namely, Clauses 14 to 18, were


withdrawn and other Clauses took their place. It will be necessary during the coming year, as those who took part in the discussion following the withdrawal of these Clauses will remember, for the Inland Revenue to keep this thing well under review and to see what, if anything, is to be done to tighten up the Clauses as they are now printed. In those Clauses we have not gone as far as our advisers suggested that we should go in closing up the gaps and loopholes which are there. We have made a beginning and it is quite likely that we shall have to come back to the House next time and ask for further power. That, in itself, will mean that the suggestion made by the hon. Gentleman will be carried out.
The hon. and learned Member for Wirral (Mr. Selwyn Lloyd) and my hon. and gallant Friend the Member for North Portsmouth (Major Bruce) wanted some sort of consolidating Measure to bring Income Tax law up to date. Of course, that has been talked of for a long while. The last consolidating Measure that we had was in 1918, nearly 30 years ago, and it is more than time that a consolidating Measure was brought in and the thing tightened up and clarified by that process. As hon. Members know, we have been extremely busy with other Measures. Consolidating Acts of this kind, although they are overdue, must wait until time can be found for them. For one thing, the staffs of the Inland Revenue and the Customs and Excise Departments are being grossly overworked. That remark goes for the whole Civil Service, but particularly for the Inland Revenue staff. Every time this House makes changes in the incidence of taxation, whether it is in child allowances, marriage or personal allowances, or a change in the standard rate of taxation, it involves many, many months of much hard work for the staffs of the Inland Revenue Department now that P.A.Y.E. has been introduced. I think I carry everyone with me when I congratulate the staff at Somerset House and in the Provinces, and the staff of the Customs and Excise Department, for the excellent work they have done under difficult conditions, often in very badly equipped buildings and with many of their people away.
My hon. and gallant Friend the Member for North Portsmouth asked whether

another White Paper might be produced showing any new wartime concessions that have been brought into being since the last White Paper was published. All I can tell him is that no new concessions, either wartime or other, have come into being since that White Paper was published. That White Paper can still be got. What my right hon. Friend did promise some time ago was that, if and when any of them were withdrawn, he would publish the fact—give notice—so that people would be well aware of what the situation was.
The hon. and learned Gentleman the Member for Wirral asked me how much the Government expected to get out of the tightening-up Clauses dealing with directors' and employees' remuneration. It is quite impossible for me to answer. What we have done has been to shut a door, and it is, therefore, difficult to know how many people would have escaped through that door it the door had not been shut But it is quite obvious that we shall make something out of this, particularly as during the last year certain insurance brokers have been doing a good deal of advertising, suggesting to a lot of people that they should take advantage of this loophole which, in our wisdom, in this Bill we are now closing. Therefore, we shall save money and bring money in, but how much I am sorry I am unable to indicate at the moment.
The hon. and gallant Gentleman the Member for Holderness (Lieut.-Commander Braithwaite) wanted to know why the concession for old age pensioners of tobacco at reduced rates had not yet begun to function. The answer, of course, is that there is a good deal of spade work to be done. It means the printing of a good many millions of forms, and then it means circulating them; and, in addition, not only forms but coupons or tokens which go with them. All I can say to him and to other hon. Members who are interested in this is that, as quickly as we can, we shall bring this concession into operation for those who are entitled to it, and who, I know, are looking forward to it. The hon. and gallant Member said that the most important item in this Bill was the Profits Tax. Well, it all depends on how you look at it. To him the Profits Tax was the thing in this Bill that loomed large. Obviously, other people would


look at the earned income allowance, or the children's allowance, or one or other of the various provisions which my right hon. Friend has put in.

Mr. Stanley: Or the Tobacco Duty.

Mr. Glenvil Hall: Or the Tobacco Duty—yes, it you look at that. When the hon. and gallant Gentleman began to speculate on the findings of the Plowden Committee, I wondered if someone would not rise in his place and ask if there had been another leakage—not a Budget leakage this time, but a leakage of another kind, for he seemed to have some inside knowledge of what that Committee was doing. Let me, in company with the right hon. Gentleman the Member for the City of London say a few words to my hon. Friend the Member for Loughborough (Mr. Follick) about toothbrushes. The reason toothbrushes are still in this Bill under Purchase Tax is because my right hon. Friend felt that first things must come first. It is quite true that all of us would like to see the Purchase Tax taken off toothbrushes, but it is our view—and I hope it is shared by other hon. Members—that we cannot take it off toothbrushes without also taking it off toothpaste; and the two together would make a substantial concession, which my right hon. Friend thought might be better made in some other direction at this juncture. I must say that I fully agree with him that we do want to keep this thing in perspective. It is quite true that the Purchase Tax at present on toothbrushes is threepence or fourpence. That may seem a considerable sum, but we do not buy toothbrushes every week. Normally a toothbrush—and, no doubt, the one invented by my hon. Friend—lasts much longer, lasts almost indefinitely.

Mr. Stanley: It all depends on how often it is used.

Mr. Glenvil Hall: Well, if they last three months, then, roughly, the Purchase Tax is about a penny per month. That, surely, is not a great imposition, particularly in these days when people go to cinemas and spend 2s. 4d. two or three times a week without turning a hair, or fill in football coupons and then buy a postal order for 10s. or 15s. We must get this in perspective. What my right hon. Friend is doing is to give relief

where it will be the most help to the greatest number. It is not that we are against the use of toothbrushes.
The right hon. Gentleman the Member for the City of London said that the Budget surplus was bogus. He is entitled to his view, but I can tell him that only yesterday I saw the returns, and I can assure him the surplus is there in hard cash. At the moment it amounts to £234 million, and that is something which has never happened before at this time of the year for many years past. I can assure him, bogus or not, the surplus is in the "kitty."

Mr. Follick: Will the right hon. Gentleman give a reply on the doubling of the Stamp Duty on conveyances of land?

Mr. Glenvil Hall: All I can do is to confirm what my hon. Friend has said, namely, that the incidence of this duty on local authorities will be exactly double what it was before. His argument may be that the local authorities, like the Government, should not have to pay Stamp Duty on transfers, leases, or conveyances. We have to stop somewhere, and it was felt that local authorities should pay this just as ordinary individuals have to pay it. It is in the Bill, and there is nothing we can do about it now, because we are on the Third Reading Debate. If he feels strongly about it, I would remind him that life still goes on, and that there will be other Budgets and Finance Bills when he will be able to put forward his point of view.
I had intended to make reference to the statement of the right hon. Gentleman the Member for the City of London, to the effect that there has been a permanent rise to £525 million in the charge on the National Debt. That is true, but he knows that it is not the fault of the Government. What we have done has been to regularise the situation, and this was explained at some length in the earlier stages on this Bill. When he speaks about the alarming rise, I would remind him that it would have been a good deal higher with a Government formed by hon. Members opposite, because they would not have been so ruthless in bringing down the rates of interest to 2½ per cent. No one who has sat through Questions in this House will doubt that the attitude evinced by hon. Members opposite towards the cheap money policy means that


if they had been in Office the rates would not have been as cheap as they are, and that this £525 million would have been a good deal higher.

Mr. Assheton: Has the right hon. Gentleman overlooked the fact that the Treasury 2½ per cent. Stock, which was issued by the Chancellor at 100, has now fallen to 90? The 2½ per cent. rate of which the right hon. Gentleman is so proud is no longer there at all.

Mr. Glenvil Hall: My right hon. Friend the Chancellor, in reply to a question by the hon. Member for Louth (Mr. Osborne), scotched that statement the other day.

Mr. Stanley: Will the right hon. Gentleman offer me more than 90 now?

Mr. Glenvil Hall: The right hon. Gentleman the Member for the City of London has just attempted to show that Treasury 2½ per cent. Stock is now listed, on the Stock Exchange daily list, at 90 or 91½. That is neither here nor there. These stocks go up and down. As the Chancellor pointed out last week, when this Government was formed they stood at 84, and they have been down to something like 43 under the Conservative Governments of the past.

Mr. Assheton: I am not unfamiliar with these things, and I am not suggesting that there is any particular merit in Consols standing at 90 or any other figure. It is not a case of the highest price being the best. If a person's temperature is

104 it is not necessarily the best sign of his health. My point is that the 2½ per cent. rate, although it was established for a short time, has, from the right hon. Gentleman's point of view, no longer any significance, because he could not issue a long-term loan today at 2½ per cent.

Mr. Glenvil Hall: That only underlines the argument I was trying to make. I am sure that Members of the party opposite, people in industry and local authorities, would like to be able to borrow money, at this time in our history, at a reasonably cheap rate. I do not understand the attitude of right hon. and hon. Members opposite in trying to cramp my right hon. Friend's efforts to keep money rates down. The fact that at the moment some gilt-edged 2½ per cent. Stock is not so high as it was a few weeks ago does not nullify my argument. However that may be, the Debate, on the whole, has been very friendly. Once or twice there has been slight feeling, but apart from that, this has been a most amicable occasion. I admit that right hon. and hon. Members opposite have helped us to improve the Bill in its passage through the House, and they have said that they will not go into the Division Lobby against us. That being so, all that remains for me to do is to commend the Third Reading to the House, and ask approval for the Bill without a Division.

Question put, and agreed to.

Bill accordingly read the Third time, and passed.

Orders of the Day — ANGLO-AMERICAN TRADE

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Daines.]

3.34 P.m.

Mr. Osborne: I apologise to the House for bringing up the wide question of Anglo-American trade so late in the afternoon, and I am grateful to hon. Members for staying here at this hour. This question is one that would have deserved a really full House, because, of the many problems we have to face, I think this ranks as the most pressing.
Last week we had a Debate on the country's import programme, from which three important facts emerged. The Chancellor of the Exchequer agreed that our dollar credits were being spent at the present time at the rate of £800 million per annum. Between January and July this year, we had already spent £400 million worth of dollars, which means, as regards our trade, that we are buying from the dollar countries at the rate of £800 million per annum more than we are selling to them. My second point is that at this rate of spending, the dollar loan will be used up completely in about six months' time. That statement was made by the right hon. Member for Warwick and Leamington (Mr. Eden) and, as it was not contradicted by the Chancellor, I take it to be approximately true. The third point which arose from that Debate affecting this was that of our total imports no less than 42 per cent. came from the dollar countries—from America—and only 14 per cent. of our exports go there.
Therefore, unless something is done in the next six months and done with great speed—something very drastic—we shall be faced by Christmas with three things. First, we may be faced with mass unemployment owing to the shortage of raw materials. Secondly we may—I think we shall—be faced with a serious cut in our food rations. I am delighted to see the Paymaster-General on the Front Bench to answer this Debate. I would congratulate him on having had the courage, a fortnight ago, to warn the country that unless the production drive succeeded and the export drive also succeeded, there was a danger that our food would have to be cut by something like half. That is a statement that required great courage, and I wish more hon. Members on the Front

Bench opposite had the courage to make similar awkward, ugly, straight statements.
The third thing which we have to face is the danger that unless we can stop this huge gap of £800 million per annum the pound will come down to about 2s. 6d. value on the 1938 basis. Already, as the hon. Gentleman will know, dollars are being exchanged at three to the pound in New York, and the rate would be worse if it were not to some extent pegged by the American bankers. On these three grounds, I think that we are facing a real crisis, the urgency of which the average person in the street has no idea. I want the Government to do something not only to meet this, but also to make it quite clear to the average man and woman in the street that we face this great crisis. That is the gloomy side. May I for a moment give to hon. Members what I consider to be the better side of the picture?
What do the Americans feel about this. because there are always two sides to every bargain? When I was in America for eight weeks in April and May, I covered some 6,000 miles from Tennessee in the South to Chicago in the North, and I tried to see all classes of Americans—Congress men, business men, leaders of the A.F. of L. and C.I.O., ordinary people in the factories and streets—and one impression above all others with which I came back was that the Americans have a great feeling of sympathy for us in our difficult position. I think that they would do anything they could to help us, but what they say, wherever one goes is, "Are you doing all you can to help yourselves?" I think that that is a reasonable question for them to ask. The newspapers throughout America are almost unfailingly friendly towards us, and even the "Chicago Tribune," which has been anti-British for 40 years, is now being kind to us. If our position is made clear to America that some adjustments are necessary, they will be made. I find there is an appalling ignorance in America of our position here, nearly as great as the ignorance over here of what the American situation is. That is saying a great deal.
The attitude of the Americans as I found them was summed up by one of the leaders in Congress when he said, "What is it that we Americans can do to help you British to put yourselves permanently on your feet?" There are two controlling


ideas there—that we do it ourselves and that we do it permanently. Yesterday in "The Times" there was this statement:
Talks have begun in Washington on the terms of the Anglo-American loan agreement and their effect on import of food and other supplies from British colonial territories.
The British Government are in particular seeking to reach agreement on an interpretation of Article IX of the loan agreement which would place no obstacle in the way of their plan for increasing production in the colonies.
Why is it that we have to gat important information like that from the American correspondent of "The Times"? Why was not some statement made in this House when these important negotiations started? First, I should like to ask, are they true; and secondly, if they are, when are we likely to have a statement on them? The correspondent goes on to say:
The State Department has admitted that it is worried by the rapid consumption of British dollars and has disclosed that it is trying to find methods of slowing down the pace.
That is one of the things which I want this Government to make clear to the British people. Our people at home ought to be worried but they are not, which is because they do not know.
"The Times" Washington correspondent further comments:
It is considered certain that agreement will be reached to allow Britain and the non-self-governing colonies to be considered as one under the loan agreement. It is unlikely that the United States would take the next step and exempt the entire Commonwealth at this moment.
Has the Minister any comment to make on those two important statements? Surely something could have been said in the House instead of compelling us to pick our information even from such a respectable newspaper as "The Times."
What I fear is that Article IX is being used as a smoke-screen or an excuse to hide our own difficulties. I do not think that that Article is a cause of our relative poverty vis-à-vis the Americans. On that I want to ask the Paymaster-General two important questions. The first is, what quantity of goods are now on offer in the Empire that we could buy that Article IX has prevented us from buying; and, secondly, what percentage of our total imports ape being affected in that way? If Article IX were entirely suspended, what statistical effect would it have upon our

position? I feel that before we ask the Americans to suspend Article IX we ought to put evidence before them and before this House as to what its effect really is. We ought to know the facts.
From my own limited observations in America I can say that if we were to state to the Americans that we wanted them to suspend Article IX for 12 months, the suggestion would have a good reception there. It is the American business man who will insist on Article IX being observed. and in the next 12 months he will have a sellers' market in the world, so he has nothing to fear. If we put our cards on the table I do not think we have anything to fear in regard to Article IX but we must know the facts. Both sides of the House will agree, I am sure, that if it is proved that Article IX really interferes with Empire trade, then, somehow or other, that Article will have to go.
The second point I should like to raise under that heading is this. Discussion is also taking place about sterling convertibility, and the excuse is likely to be made that this sterling convertibility will hinder us in making the recovery that we could otherwise make. I ask the Paymaster-General what it would cost if sterling convertibility were not interfered with at all. It has been suggested to me that in the first six months it would cost something like 600 million dollars, which is about one-third of what remains of our Loan. Could the Paymaster-General say something about those figures? Again, I believe that convertibility of sterling would not be a difficult problem for us if our facts were placed before the American people, and I should like to ask the hon. Gentleman whether the American Government have, in fact, been approached on these two subjects. If so, when are we likely to obtain some results and, secondly, are the Cabinet satisfied that the Central Office of Information in this country and the British Information Services in New York have done their part both here and over there to make the position known? If they have not, obviously something ought to be done.
Some hon. Members may say, "Do not get excited and worried about what appears to be a crisis. We shall be all right because we have the Marshall plan and that will save us." I think it would he a tragedy for us to take that view. First of all, we have not got the Marshall plan;


the American public may say "No." The Marshall plan is a magnificent gesture. When Lend-Lease was first introduced, my right hon. Friend the Member for Woodford (Mr. Churchill) said that it was the most unsordid act in human history. Surely the Marshall plan is doubly so? I am not casting any doubts upon the fact that it may come, but it is not certain, and what I feel about it is that we are much more likely to obtain the Marshall plan help if the Americans are convinced that we are helping ourselves l00 per cent. An ounce of self-help is worth a ton of help from outside and, therefore, it is vitally important that as far as possible we should stand on our own feet and should increase our export trade.
May I ask the Paymaster-General another question? It is often said that from this side we talk a lot of nonsense but do not ask questions, and I am now trying to disprove that. Are the Government satisfied with the drive, energy and productivity of those engaged in the export trade? If they are, I am not, and I do not think that any American who reads this publication—the Monthly Digest of Statistics for June—could be expected to be so satisfied. In this June issue, which is the latest available, it is stated that the total volume of exports for the first quarter of this year from January to March was 100.5 per cent. compared with 1938—just a tiny bit more than we exported in that year. But according to the Government's own figures the numbers employed in getting that work done are these: in 1938, 930,000 people were employed in the export trade and in March of this year no fewer than 1,440,000. This means that 55 per cent. more English people were engaged in the export trade to produce the same amount of goods as were produced by 930,000 people under what hon. Gentlemen opposite like to describe as the inefficient Tory administration.
I can see one Minister on the Front Bench opposite giving advice to another, and I can almost hear him saying, "Of course, it was bad weather. We could not export." Let us take the previous quarter, where there is no such excuse. In the last quarter of 1946, when the weather was good and was no hindrance to exports, the volume of exports from

this country was 110.8 per cent. of those of 1938. The number of people engaged in the trade in that quarter averaged 1,440,000 as against 930,000 prewar. Even in that quarter there were 50 per cent, more people engaged in the export trade and they produced only 10 per cent. more in the volume of goods. It is fair to say that that is not a satisfactory state of affairs. Are the Government satisfied with their own figures? Have they looked into them, or do they think that we are entitled to go to America and say, "Please give us the Marshall Plan, please give us another loan, but we shall want three men in England to do the work two used to do in 1938"? The one thing these figures show above everything else is that the restricted 40 hour-week has failed and that the sooner we get away from it the better.
The Government have men who write and speak and apologise for them. In the "Daily Herald" this week, on this very question, I read an article by the hon. Member for Devonport (Mr. Foot). First of all he quoted this:
The Washington correspondent of the 'Observer' reports that Britain would get more sympathy if to Americans she seemed to be showing more determination to help herself.
The hon. Member objects to that. I can see no reason for objecting to it. Surely the Americans are entitled to say, "You must help yourself first before we are prepared to come and help you still more." Later on he threw a gibe at my right hon. Friend the Member for West Bristol (Mr. Stanley). He said this:
…or perhaps the Americans have been listening to such spokesmen as Mr. Oliver Stanley. He, after all, is perhaps the most intelligent Tory on the Opposition Front Bench.
What does. he say? This is the quotation:
'I am not sure,' he said in a speech at the week-end, that America will be prepared to work six days a week in order that the people of this country should work five days or four days a week.'
The hon. Member for Devonport objected to that. Is there an hon. Member opposite who expects the Americans to work six days a week in order that we may produce the footling, disgraceful figures which the Government have produced? I hope not. It is a good old rule, even in the Labour Party, that God helps those who help themselves. At least, it seems so by the


new people who come on to the Front Bench. I therefore make the plea that we should show to the Americans in our export drive that we are doing everything in our power to help ourselves. Those who object to this attitude should at least remember what has been said by three of their spokesmen in the last 10 days. The Minister of Fuel and Power has been saying that certain of his miners are not doing what he considers to be a fair week's work and he has gone so far as to threaten them with imprisonment. Mr. Deakin, who is the boss—the gauleiter—of one of the biggest trade unions, has gone so far as to threaten conscription. All this is showing—

Mr. Blackburn: I agree with a great deal of what the hon. Member for Louth (Mr. Osborne) says, but I must appeal to him to abandon this phraseology and not to refer to Mr. Deakin as a gauleiter. We know Mr. Deakin and we know that he is a fine democrat and a person with whom we are proud to be associated.

Mr. Osborne: On that ground, Sir, with your permission I withdraw the remark. I do not wish to attract any of your scowls of disapproval, Sir, so may I finish by saying that I feel that by Christmas this country will be facing such a crisis that very few people in this country can imagine what will possibly happen, and our only hope is somehow to close that gap of 800 million sterling, for the 42 per cent, imports that we are now getting from America. I do not know where else we can get them from—

Mr. Richard Adams: May I interrupt the hon. Member? In view of the fact that he stated quite clearly the necessity for closing that gap—and I have listened carefully to what he said—why did he vote against the proposition of the Government last night to make a start on closing that gap by reducing our imports of newsprint?

Mr. Osborne: That is an interesting question. The answer is, because it was footling and piffling. It is typical of what the hon. Gentleman's party are doing. They are playing with a serious and tragic position. They are wanting to save £2 million out of 800 million. They are fooling the people. That is why I voted against them. I would not

vote against them if they would do something they ought to do, something really drastic—

Mr. Adams: I take it, then, that the hon. Member believes that to make a start on saving £800 million by saving £2 million is foolish. I cannot follow that logic, but where does he propose to make the cuts?

Mr. Osborne: To start with a cut of £2 million when you have to save £800 million is just playing with the thing.

Mr. Adams: Mr. Adams rose—

Mr. Osborne: No, I have given way already.

Mr. Adams: Will the hon. Member forgive me for just one moment? It has been made perfectly plain by the Chancellor of the Exchequer, the President of the Board of Trade and other Ministers, that this cut in newsprint was only the beginning of other kinds of cuts that will have to be made later on. It has been made perfectly clear on a number of occasions.

Mr. Osborne: If the other cuts are to be made, why in the name of goodness, were they not all made together? What vested Socialist interest is the Cabinet afraid of?

Mr. Beverley Baxter: I wonder if my hon. Friend will allow me to interrupt? I am not quite certain, Mr. Deputy-Speaker, whether the procedure allows me to assist my hon. Friend in answering the interjection. May I point out to the hon. Gentleman on behalf of my hon. Friend that, by cancelling at the present time the Canadian contracts to supply us with newsprint, we shall shortly have to pay far more for our newsprint that we did before, and this cut of £2 million means a financial loss of the biggest description.

Mr. Osborne: That is getting away from my point. [Laughter.] I do not regard this as a laughing matter. I feel we are faced with a crisis, and if this Adjournment Debate does nothing else than draw attention to that crisis, the time will not be wasted.
I want to ask the Paymaster-General whether all Government Departments are doing all they can to attract American industrial capital on long-term investment


into this country, because I think that is one of the greatest ways in which that gap will be closed? In the 19th century we sent our exportable surplus over to America and developed it there; now, Americans have to do the same thing over here. When I was in New York I tried to induce one great textile combine to bring over here their machinery, their technical knowledge, their raw materials, their working capital. That would have found work for our people, it would have given us exports, it would have helped us. I was asked these two questions which I present to the Paymaster-General: will this Government guarantee to such American industrialists, if they come here, that they will be permitted to take their profits in the way of dividends back to America when they have earned them? That is, will the Treasury allow them to take over the fruits of their earnings? Second, I was asked this: could it be guaranteed that the Socialist Government would not confiscate their assets once they had been well-established over here? Unless the Government give a "Yes" to both of those questions, American industrialists will not come here and establish their businesses. I would like the Paymaster-General to give a complete and unequivocal answer to that. Finally, I would urge upon the Board of Trade, in so far as they can, to encourage all business men in this country who can export to America to go over there to investigate the markets for themselves, to make as many goods as possible, and to see that "Made in.Britain" remains the mark of the finest and the best article. If they will do that, it will help in a small measure to fill that gap. If we do not fill that gap, I think it is, God help this country.

3.55 p.m.

Mr. Richard Adams: I had no intention of intervening in the Debate, but I came along out of interest to hear what the hon. Member for Louth (Mr. Osborne) had to say. I must say his observations today were perhaps more economically sound than some of his previous utterances in the Chamber. There are a number of points he made which I would like to take up, and which might perhaps assist the hon. Member to understand some of the difficulties of the situation at the present time. He said, in the first instance, that he was surprised to find

that 42 per cent. of our imports came from America, and that we were only exporting 14 per cent. I think if he looked up any commercial geography of the days before the war, he would find those figures were approximately correct in those days—

Mr. Osborne: I never used the words "I was surprised." I made the statement that that was a fact.

Mr. Adams: The hon. Member was expressing concern—

Mr. Osborne: "Concern" is different.

Mr. Adams: —that that was so, and said that those figures should be altered in some way. It is most unlikely that those figures could be drastically altered in a normal economy, for the simple reason. as the hon. Member should know, that they were the kind of figures which operated before the war. We imported our food and raw materials from America, and distributed finished goods to the rest of the world, for which we got the money with which to pay for our imports from America. That is one of the reasons why it is necessary to get world trade moving again. Until we get world trade moving again, there is no way out for this country. That is why the President of the Board of Trade has been emphasising time and time again the need for getting trade going again, in order to restore the balance.

Sir Wavell Wakefield (St. Marylebone): Surely one of the reasons for the difficulty which this country and the world experienced in the years between the two wars was the fact that the United States of America put up high tariffs, and would not receive back into the country the finished goods this country could send to America, if America had not put up high tariffs. If those high tariffs were only allowed to come down, we could send more finished goods there, and purchase more goods from there more easily.

Mr. Adams: I think the chance of this country competing successfully in America on a wide range of manufactured goods is pretty remote.

Hon. Members: No.

Sir W. Wakefield: There is a very large market indeed for specialised goods. I agree we cannot compete on certain mass-produced goods, but we can compete in specialised goods, and there is a big market for them.

Mr. Adams: I said in a wide range of manufactured articles, and naturally I had in mind the mass-produced articles on which America compares—to put it mildy—very favourably with ourselves. I do not deny that there is a market for specialised articles, textiles, whisky, and so forth, but the whole range of articles they would be prepared to accept in a perfectly free market, would not be sufficient to balance our imports of 42 per cent. We would have to make up the difference between what we take from America and what we give America by the balance of trade with the rest of the world. Our only hope is by freeing the whole world trade. While we are talking about American tariffs, I think we must be thankful that the Americans altered their attitude on that subject during the war. The whole conception of Bretton Woods, the International Bank and the International Fund is to get international trade moving on a satisfactory basis. Until that is done there is no hope of altering the present situation satisfactorily. It can only be done by cutting down our imports, which nobody desires.
I listened to what the hon. Member had to say about the fear of mass unemployment and about the drastic cuts which would have to take place before the end of the year. I interrupted to ask him how he voted last night. I cannot see how any Members of this House can vote against a very small reduction in the imports of newsprint into this country when they themselves say the following day that they know that there must be drastic cuts in the import of raw materials and food. I hope that in due course they will go to the country on that issue, that they would rather continue to bring newsprint into this country and cut down imports of essential raw materials and food.

Mr. Osborne: And films.

It being Four o'Clock, the Motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Hannan.]

Mr. Adams: The hon. Member said he was very worried about the rate of consumption of dollars.

Mr. Baxter: Before the hon. Member leaves the point about the vote last night, I wonder if he would answer this point, which the Minister of Health refused to answer, that is, that by going back upon our signed word with the Canadian pulp manufacturers and newsprint suppliers we are destroying the security of that market, and this £1 million saving will result in a vast increase of dollar expenditure in the future and be a cause of insecurity for our newspaper suppliers? Will the hon. Member answer that or will he continue with this parrot repetition about last night's vote? Will he explain his own vote, in view of that?

Mr. Adams: While I am gratified that I should be asked to answer something which the Minister of Health is stated to have been unable to answer, I should be ruled out of Order if I went into the technicalities of the basis on which that contract was made and of the basis on which the curtailment is being arranged. Perhaps on some other occasion we might discuss that.

Mr. Baxter: That is enough to make the hon. Member a Minister in the next reshuffle.

Mr. Adams: Again, I would say I am greatly flattered by the suggestion that the next regime will be found on this side of the House. It shows that the hon. Member has no hope that it will be found from his own side.

Mr. Baxter: I said "reshuffle "

Mr. Adams: If I may return to the matter under discussion, the hon. Member for Louth was worried about the rate of consumption of dollars, a matter about which we are all concerned. He did not go on to explain why that rate of consumption had been increased. The obvious reason is that American prices have risen considerably since the loan was made, and if we want to buy anything like the quantity of goods we had in mind when the loan was made it is obvious that the rate of drawing from the loan has to be increased.

Mr. Osborne: It is not with what has happened in the past but with what we are to do in the future that we are concerned. Speak about the job in front of us.

Mr. Adams: The hon. Member said he is worried about the rate of consumption of dollars. I should think it is important, since he implied many times during his speech that the Government were responsible for the present situation, that we should understand that the rate of consumption of dollars has increased, first, as I think is accepted by everybody, because of the higher internal level of prices in America since the loan; and second, because of the slower rate of recovery in Europe compared with what was expected a year or two ago. One of the reasons why we cannot restore our trade position is this vacuum which still exists in Europe and the rest of the world. That is the reason for the Marshall plan being put forward. It is to fill that vacuum. The Americans realise as well as we do ourselves that the whole conception of Bretton Woods and the International Bank cannot operate in the world conditions of today. We must get international trade working freely, and that is quite impossible with the quagmire which we have in Europe at present. Until that quagmire is filled with the help of American dollars, through the Marshall plan, we cannot hope to get back to a reasonable state of world trade.
The same thing applies to sterling convertibility about which the hon. Member was worried. The arrangements regarding the convertibility of sterling were made on the assumption that by July of this year world trade would have been well under way again. In fact, events have not turned out that way. Therefore, there must be fresh discussions on sterling convertibility. Since the hon. Member was so concerned about the present situation and implied—

Mr. Blackburn: He has a right to he. He is a Member of Parliament.

Mr. Turton: Is the hon. Member for Balham and Tooting (Mr. Adams) not concerned?

Mr. Adams: I have said, time and again, during my brief remarks that we are all concerned. But there is a difference between being concerned about the situation with a genuine concern to get the country on its feet again, and, by implication, suggesting that the Government are not handling it properly. I am sorry to see the hon. Member for King's Norton (Mr. Blackburn) taking the view that he

does on this matter. I would remind the hon. Member for Louth that the present situation is caused chiefly by the ending of Lend-Lease after the war. Since he raised the question of this present crisis, I would remind him that it largely arises because of the failure to have proper termination clauses in the Lend-Lease Agreement. At the time of the Agreement it was visualised that, when the end of the war came, this country would need some time in which to recover. Lend-Lease was not a one-sided arrangement. It was not a gift from America to ourselves. Under the financial arrangements we ran our industries down quite voluntarily. We wound down our export industries on the assumption that after the war, we would have a proper opportunity to set ourselves on our feet again.
There are many other points which I could raise in connection with the hon. Member's speech, but I know that other hon. Members want to take part in the Debate. Whilst I recognise his anxiety about the present situation, an anxiety which we all share, I ask the hon. Member instead of talking so much about this country helping itself and the fact that we must not be dependent on American help, to realise what this country went through during the war years and to remember the contribution we made towards winning the war. We have a right to expect help from outside, not out of kindness but as a proper contribution to the winding-up of the war arrangements.

4.9 p.m.

Mr. Turton (Thirsk and Mahon): I think we have had an unfortunate apology from the hon. Member for Balham and Tooting (Mr. R. Adams), because he said.that this country has not got scope for quality production. I believe that to be entirely wrong. I believe that there is a great export market for quality production. Secondly, he tried to wriggle out of the breach of faith and the breach of contract involved in the newsprint cut. I do not propose to go into that question.

Mr. R. Adams: Why not?

Mr. Turton: Because the Minister must have plenty of time in which to reply. I want to deal with one point in connection with the balance of trade with America. I refer to the position of dried eggs and maize. I am strongly of the opinion that


we can no longer afford to spend £5 million in five months or, I believe, more than £12 million a year on dried eggs. Equally, I believe that we could produce the eggs for the housewives by getting maize from America. America has a surplus this year of six million tons of maize compared with last year. This House has never been told why the Government have not gone to America and said, "We cannot afford to spend these large sums on dried eggs, but we must buy maize so that we can produce the eggs at home in the form of real eggs." I hope that the Minister will explain the position.
The other point I wish to, raise is on the question of Article IX. It is quite clear that the whole of our trade is being hampered by Article IX of the American Loan Agreement; not only our trade with our Colonies, but our trade with our Dominions, and also our trade with those countries in South America that are anxious to trade with us. They have not got sterling balances, and equally they have not got dollar balances. This report that has come out in the papers today that the Government are merely trying to have Article IX revised in so far as it deals with our trading with our Colonies, is doing a great deal of harm. Of course, we want to revise it in respect of trading with our Colonies. It is most important that we should encourage that trading by revising Article IX, but it does not carry us sufficiently far. We want to have that Article IX—the non-discrimination article—applied generally over the whole scope of trading with our Dominions and with the South American countries.
How far have the Government worked out their plans for seeing whether we can get bilateral agreements in order to encourage trading? I know they are in difficulties over that, in view of the proposals for world trade at the Geneva Conference. But unless we look at this realistically, to see whether some countries are being prevented from trading with us because we cannot trade with them owing to Article IX—unless we tackle that question—I do not believe we shall get out of our economic difficulties as quickly as we otherwise would. I will put it like that. Whether under this Government or another, I am sure this country is determined to get out of this crisis, if only whoever are the Govern-

ment will give us the lead. We are not receiving that lead today.

4.12 p.m.

The Paymaster-General (Mr. Marquand): I think that the large number of hon. Members who wish to speak proves the intense interest which this House has in this subject. Despite the fact that we have debated it quite recently, there is a number of Members who wish to speak. I do not wish to intervene to prevent them from doing so, but at the same time I feel that if I do not get up now, perhaps, the hon. Member for Louth (Mr. Osborne) who raised the topic may feel that I shall not have sufficient time to deal with some of the points he raised I must say that we did have, a comparatively few days ago, a long Debate on the world balance of payments in general, and on the United Kingdom balance of payments in particular.
It was a Debate caused by the announcement by the Chancellor of the Exchequer of cuts in imports. Both he and the Lord President of the Council dealt very fully at that time with all sorts of wide, general questions affecting our balance of payments, and they pointed out that this is a world crisis. It would be an extraordinary thing if this afternoon, so shortly after that Debate, speaking late on a Friday afternoon, I were suddenly to make some new announcement about Article IX and matters of that kind. I cannot think that I can be expected to confirm or deny any statements which may have been made in the Press of this country or in the United States of America. Nor can I say anything about consultations with, the United States of America on the question of Article IX.

Mr. Erie Fletcher (Islington, Last): Will my hon. Friend make it quite clear to the country whether the discussions going on relate to the interpretation of Article IX or to the revision of it?

Mr. Marquand: I have not even said that discussions are going on. All that I would say is that it is well known that we are, naturally, in constant touch with the American Government on all these important questions, and I really do not intend—and I think I cannot fairly be expected—to say anything about this


wider question this afternoon. I well remember a speech by a colleague of mine on a Friday afternoon which was subjected to a great deal of criticism because he chose at that particular time to make an important statement. But I will refer quite shortly to some of the points—and there are a great many other points—which have been raised. Of course, the hon. Member for Louth was quite right in saying that the first six months' drawings on the United States and Canadian Loans were at the annual rate of £800 million—that is to say, £400million were drawn in the first six months—and that there was £955 million worth of the loan in hand at the beginning of 1947.
The hon. Member then asked whether the statement by the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden), that at this rate the loan would he exhausted at some particular date, was a correct one or not. I really do not know. I have not bothered to examine his arithmetic. Quite likely, at this rate, his statement was a correct one, but we do not have to assume that the loan will be continually drawn on at this rate. What we have to ask ourselves is what are the conditions which determine the length of time the loan will last us. My right hon. Friend the Lord President of the Council has already explained in public—and it has been widely published in the newspapers—that by his remarks about the clock striking in the autumn he did not mean that the loan was going to be exhausted in the autumn. Surely, the length of time the loan will last will depend on a great many factors, of which the principal is the rate at which we import. It is necessary, in these circumstances, for hon. Members on both sides of the House to realise and impress on the country the necessity for a most careful scrutiny of all our imports, and for keeping them down to the minimum, consistent with the health, safety and welfare of the country.

Mr. Blackburn: While I agree with that entirely, surely the people are entitled to know the truth, and to have a reasonable estimate from the Government now on this vitally important matter of when the loan is going to run out; otherwise people will not know why they have to work harder?

Mr. Marquand: No one is going to say that on such-and-such a date in such

and-such a month the loan will be gone, for the reasons I am trying to explain. First, it depends upon the rate of our imports. It is necessary to keep these very closely under review. I cannot say precisely what are the intentions of the Minister of Food in regard to dried eggs, which were apparently so very desirable when Sir Ben Smith was in office, and are so undesirable now that my right hon. Friend is in office.

Mr. Osborne: May I interrupt?

Mr. Marquand: The more the hon. Member interrupts, the less I can say.

Mr. Osborne: It is important that we should know what is going to happen. Surely the very basis of planning is that we should be able to plan ahead, and without having an estimate, we cannot do that.

Mr. Marquand: It depends on the rate at which we import, and it depends on the course of import prices. Import prices have been moving very seriously against us, which has increased our difficulties, and that is in fact the main cause of the acuteness of the present difficulties—the upward movement of world prices of raw materials and foodstuffs, particularly the upward movement of dollar prices. If dollar prices rise at this rate, the purchasing power and the real value of the dollar is surely declining. The hon. Member need not be alarmed about some black market prices for sterling in a limited black market in New York at the time when the purchasing power of the £ is remaining more stable than the purchasing power of the dollar. The length of time the loan can last depends upon the extent of the import restrictions imposed by those other nations to whom we wish to sell our exports, as a result of their own shortage of dollars. It is very difficult at the present time to estimate the exact incidence upon our ability to export of these various restrictions which have been put on quite recently.
In general, the extent of the time we can rely on the loan depends on European recovery. It depends very much on the kind of harvest which is reaped this year in Europe and, indeed, all over the world, and upon our ability to obtain grains from Europe and to feed Germany from European and not from dollar sources which, again, is not quite certain at the present time.

Mr. E. Fletcher: Are we to assume from this that we are committed to feeding Germany for an indefinite time?

Mr. Marquand: Somebody has to teed Germany, and the feeding of Germany has to come out of the total resources of the world. If the corn and grain have 'o be used from dollar sources it will be more difficult for us to obtain the necessary grains which we ourselves require whoever pays for it

Mr. E. Fletcher: Would not my right non. Friend agree that a great many people think that the time has now come when we should limit our responsibility for feeding Germany from our limited dollar resources?

Mr. Marquand: My hon. Friend knows perfectly well that I do not intend to answer questions of that kind this afternoon, for the reasons I have already given. The length of time that ale loan will last, and the extent to which we have to rely on the dollar credits obviously depend in turn, in a large measure, on our own ability to export goods in payment for our necessary imports. I want to deal with this as my final point and at some length, because the hon. Member asked several questions on the subject. He asked about the figures of the numbers of persons returned as employed in the export trade as compared with the movement of the volume index. In a Debate quite a long time ago, I tried to explain that those figures cannot very easily be compared because the numbers of persons employed in the export trade are confined to the manufacturing industry, whereas the exports upon which we base the so-called volume index include all exports, including those drawn from the non-manufacturing industries. In 1938, that included a very considerable quantity of coal. In short, the figures need to be interpreted with a good deal of care.
I will not attempt a lengthy exposition of what exactly we mean by volume. It is obvious that we cannot add together tons of coal and bottles of whisky, so that the volume index is in fact a value index corrected for the movement of prices but it relates to a quantum of exports, including coal, whereas the labour index refers only to manufacturing industries.

Mr. Osborne: Will the hon. Gentleman answer one question—

Mr. Marquand: I should prefer not to do so, because I have only seven minutes left. The hon. Gentleman asked whether we were satisfied with the vigour of the export industries, and there I want to say a word about what we have tried to do to increase our exports to the dollar markets. Last autumn my right hon. and learned Friend the President of the Board of Trade held a special meeting with the Federation of British Industries and other bodies fully representative of the export trade. He devoted two sessions specially to the consideration with them of ways and means of increasing the volume of exports to the dollar markets in view of the approaching dollar shortage which he could then perceive.
I want to assure the House that a great deal has been done in this matter of trying to increase the proportion of our exports which go into the dollar markets. I am glad to say that in the United States of America we have extremely able men on the commercial side of the foreign service. Hon. Members will be familiar with the name of Sir John MacGowan, and there are on his staff extremely able people who have devoted a great deal of time and attention to special surveys and studies of the dollar markets. I myself sent out the permanent head of the Overseas Trade Department to make a study of our organisation in America and Canada in order to be sure that it was ready to assist us in this drive. Later, special civil servants were sent to study the markets of New Orleans. Chicago and those around the Pacific Coast, because we felt that in the past they might have received insufficient attention from British traders who had been apt to concentrate very much on New York.
A great deal of information about these dollar markets is now available at the Board of Trade for the use of manufacturers. We believe that many hundreds of British firms are concentrating on this effort to expand their trade in those markets. I am glad to say that they are receiving a great deal of co-operation from the other side. Is it generally known that the United States Department of Commerce has itself set up a special importing department to encourage import of manufactured goods into the U.S.A.? I would like also to pay tribute to the work done in London by the American Chamber of Commerce which has set up,a similar com-


mittee to explain to British firms in England the opportunities for sales in the dollar market. I would also refer to the special efforts which we have made to encourage visits by American tourists as well as, of course, other tourists to these shores. As I mentioned in another place before I came to the House this afternoon, we estimate that 140 000 foreign tourists came to this country during 1947 up to the end of June. We fully expect that tit? target which we have set ourselves for foreign tourists will he met this year.

Mr. Baxter: Can the non Gentleman give an estimate of the average length of the visits of these tourists?

Mr. Marquand: I have not the figures at the moment. The hon. Member for Louth referred to the possibilities of American investment in this country, which is a potentially important element of this problem and I can say that we do not turn a deaf ear to American firms who wish to consider the establishment in this country of new undertakings. We apply to them the same principles s we apply to British firms wishing t) set up new undertakings, and already several American enterprises have been located in the Development Areas. The same sort of conditions will apply to them as apply to British concerns.
With regard to American investments in another form, namely, in obtaining holdings in British enterprises, obviously, that matter has to be approached with a little more circumspection for reasons on which, I am sure, both sides of the House would agree. Even now there is certainly no prohibition. As for any fears which American investors may have about inability to withdraw dividend or interest payments from this country, I wish to say very definitely that they need have no

such fears. Throughout the war, we upheld the principle of allowing the dividends of investors overseas to be remitted to them in their own currency. We hope that we may be in a position to continue to observe that principle.
Lastly, I must refer to the plea of the hon. Member for Louth that our own people and the American people should know of our position. "What do the American people know," he asked, "about the state of things in this country?" I hope that they are being told the truth about our achievements. So far as we can through Government agencies we give this information, but it should not only be done through Government agencies. Indeed, what is done through Government agencies is always to some extent suspect. I hope that every hon. Member who goes abroad and every businessman who visits the U.S.A. will tell the story of the proud achievement of our people during the last two years. I hope that they will be told that this country has suffered the burden and strain of two world wars, in which she mobilised more of her manpower than any other country in the world. Already she has remobilised seven million people from war production to peace production. They are happy and harmoniously at work, with a lower record of industrial disputes than ever before in our history, and one unparalleled in any other country. Our coal consumption is higher than it ever was, despite all the difficulties. Indeed, part of our difficulties are caused by the prosperity of our industry, and I hope, and know, that the British people and the British Government are determined that it shall remain prosperous.

It being Half-past Four o'clock, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.